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Amended return no change in tax

Technical topics regarding tax preparation.
#1
MIKEB  
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Client received a corrected 2015 1099 that reduced the capital gain distributions by $5,000. Client had no taxable income for 2015, so the only affect is the capital loss carryover. File 1040x? or just adjust the carryover on 2016?
Thanks!
 

#2
WEISSEA  
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How does the IRS computer know the mismatch has no affect on tax balance. You could file a simple 1040X, or you could wait around a couple of years to see if you get a mismatch notice and respond to the notice then. I would do the 1040X in a slow period becasue its a few minute job and possibly might help the IRS improve their corrected 1099 procedure(e.g. allow e filed 1040X like they do for entities).
 

#3
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I would do the same thing I always do with NOL's, just adjust the next year capital loss carryover to reflect the correct amount. Only file an amended return if you get a notice from the IRS, if only to show them the correct computation.
I had an audit once where the taxpayer had forgot to include some items of income, but since it didn't make any difference in the tax the auditor basically ignored it and we didn't have to amend anything.
 

#4
MIKEB  
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WEISSEA wrote:How does the IRS computer know the mismatch has no affect on tax balance. You could file a simple 1040X, or you could wait around a couple of years to see if you get a mismatch notice and respond to the notice then. I would do the 1040X in a slow period becasue its a few minute job and possibly might help the IRS improve their corrected 1099 procedure(e.g. allow e filed 1040X like they do for entities).

The client had zero taxable income and the income was less on the corrected 1099, so this will not trigger a notice and the IRS will not care.
 

#5
COGS  
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MikeB or anyone have an update? I got a late K-1 which is basically just a $15K capital loss which only adds to the clients existing capital loss. I am leaning towards just adjusting to carryover next year.
 

#6
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There should be no harm in filing a 1040X to change information, such as a capital loss carryover. In fact the 1040X instructions cover this possibility:

Instructions for Form 1040X wrote:You are only changing information. If you aren’t changing
any dollar amounts you originally reported, but are changing
information, do the following.

  • • Check the box for the calendar year or enter the other
    calendar or fiscal year you are amending.
  • • Complete name, current address, and SSN.
  • • Complete Part I, Exemptions, on page 2, if you are changing
    your exemption information that doesn’t change any dollar
    amounts.
  • • Check a box in Part II, if applicable, for the Presidential
    Election Campaign Fund.
  • Complete Part III, Explanation of changes.


Leave all the dollar amounts blank, and only include the forms that have changed, such as Schedule D.
 

#7
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There would be little harm, but I wouldn't advise it.
There's no value in doing so.
If you're audited, you'll need to substantiate your carryforward either way
~Captcook
 

#8
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I would guess that it likely reduces the chance of being audited in the first place. Which seems more likely to catch an examiner's (or computer's) eye?

  1. 2017 Schedule D shows $24,000 capital loss, and $3,000 is deducted on the 1040. 2018 Schedule D inexplicably shows a $36,000 capital loss carryover instead of the $21,000 that would be expected.
  2. 2017 Schedule D shows $24,000 capital loss, and $3,000 is deducted on the 1040. 2017 amended Schedule D shows a $39,000 capital loss, with explanation given in Part III of 1040X. 2018 Schedule D shows a $36,000 capital loss carryover.

But the chance of an audit is so low that it hardly makes a difference either way. I would lean to the side of caution, and spend the 2-3 minutes it takes to prepare a 1040X. (Did I mention that you can leave almost all of page 1 blank?)
 

#9
makbo  
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MSchmahl wrote:I would guess that it likely reduces the chance of being audited in the first place. Which seems more likely to catch an examiner's (or computer's) eye?


Would they even have access to the amended version of the form, seeing as how it was paper filed? And I have yet to hear an anecdote where the IRS computer generates inquires based on automated comparisons between two different tax years.
 

#10
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I don't think amended returns are digitized the same way as original returns, but the transcript would at least say "Amended return filed" which might prompt someone to actually go look it up.

And who knows, it might make a difference in their DIF score, the details of which are kept secret.

But an examiner only stands to collect about $700 - $1,000 by disallowing a $3,000 capital loss anyway, or three times that by auditing all open years, so the audit risk is close to zero whatever you do.
 


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