Reply to Tammy Falkner's Post: Yeah, I know about the penalty if late and one owes. Not a worry.
Okay, you can maybe save me a lot of time. Maybe I won't file at all for 2001, 2002, 2003 (I got a real job for 2004-?) depending on your answer.
I noticed with disgust that on my Federal 2000, the year that I made a whopping $6300 in wages (not stock gains, I lost in stocks, remember), I was FORCED to offset this measly wage by $3000 of my capital losses! Even though I would have owed no tax on $6300, they made me take the deduction
(at least I THINK the form made me...) so that my taxable income
was $3300 instead of $6300. Of course, I still owed nothing, but I was forced to waste $3000 in losses that I really wanted to roll over year after year until I got a real job in 2004.
However, if they are going to play that game on the 2001, 2002, etc. forms, then I might as well not even file.
USA TODAY TAX EXPERT answered a similar question as follows (note they refer to being required to offset earned income with losses if losses exist, even if rolled over, but in my case, there was no earned income in ensuing years...am I still forced to apply losses to income of 0 much like I was forced to apply losses to income of $6300?! If so, forget it, I ain't filing! Of course I will then file for the years I was employed, 2004-present.)
USA TODAY Question:
My son and daughter have multiple years of capital losses (Max $3,000 yearly limit) from mutual funds. Are we required to offset earned income during the ensuing years? Or is there any possibility on just offsetting capital gains in future years that I could select, since my children do not have any capital gains this year. IRS publication 550 does not address this situation clearly but I am guessing we must use the loss each year until it runs out . Is that correct?
Dale Walters: Yes, the $3,000 deduction does offset other income on your tax return, including wages. There is no flexibility in this.