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I've got a rather specific question and apparently couldn't…

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I've got a rather...

I've got a rather specific question and apparently couldn't get a direct answer from anyone at the IRS. Is that something you could help with?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

The issue has to do with a stock loss. The rule states that once such a capital loss is declared the carryover of the remaining loss must continue until exhausted. However, in my research I see that folks are not obligated to declare such a loss. 9 out of 10 times it makes sense to claim the loss in order to reduce tax liability. That said, I'm the exception... Given my already low/limited income where I had no tax liability in the first place claiming the loss actually hurt me further in that it lower my EIC. At this point, I'd like to amend my previous tax return in order to NOT claim it, but the first two years that it was claimed (which in reality again it never should have) are now time barred. So does that mean I am FORCED to keep claiming it or may I amend the most recent return to take it off where the statute of limitations has not expired? A very detailed question I know, but I just cannot find the answer on my own...

Submitted: 5 months ago.Category: Tax
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3/6/2018
Tax Professional: Barbara, Enrolled Agent replied 5 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,669
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Unfortunately, you cannot choose whether to take the capital loss carryover each year. It must be taken until it is exhausted.

The following link contains great information about this:

https://ttlc.intuit.com/questions/2566411-do-i-have-to-use-a-capital-loss-carryforward-even-if-i-have-no-taxable-income

I wish I had better news for you.

Thank you and best regards,

Barb

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Customer reply replied 5 months ago
even though I was never legally obligated to claim the loss in the first place, but because I had an accountant who apparently was trying to "justify" his fee by putting as much into my return as possible, when it clearly did NOT make sense to do so being that I had NO tax liability and claiming the loss actually lowered my refund (derived by the EIC) I am now bound by such a clearly poor choice on his part that he wasn't even legally required to make in the first place? That just seems like tortured logic to effectively penalize an innocent party for the mistakes of his or her tax preparer... Is that what you are effectively saying?
Customer reply replied 5 months ago
I should add that in my research I had already read the link you attached to your response. Perhaps I ought to make clear that I'm not trying to save the tax loss for a more advantageous time, but rather I am trying to essentially "erase" it from past tax returns whereby I simply seeking to NEVER claim it.
Tax Professional: Barbara, Enrolled Agent replied 5 months ago

I understand what you're trying to do, but your accountant did what he was supposed to do. He claimed the carryover loss as appropriate.

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Customer reply replied 5 months ago
From your reply I'm afraid you may be missing my point... I understand that the obligation of carrying over a loss until it is exhausted once it has been claimed. However, this accountant didn't merely carryover over a previously claimed loss. He is the one who made a point of claiming the loss in the first place when I mentioned that after purchasing stock in a company it subsequently when bankrupt and I lost every penny of my investment. That notwithstanding he did not HAVE to claim the loss. In my research I found that taxpayers are not OBLIGATED to declare a new stock loss on their tax returns that has not been previously declared. Again, more often than not it obviously makes sense to claim such a loss, but in my case I was the exception to the rule where all it effectively did was to financially penalize me FURTHER because there never was any tax liability owed that needed to be reduced or offset. So please correct me if I'm wrong (with say the governing statute that states that taxpayers have an affirmative obligation to declare a stock loss in the first place) because that goes to the heart of my original question...
Tax Professional: Barbara, Enrolled Agent replied 5 months ago

You are correct that you did not have to initially claim the loss at all, but your accountant prepared your return in accordance with the information you provided to him. He claimed the loss because you mentioned that you suffered the loss. If you had not mentioned it, he would have never known to do so.

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Customer reply replied 5 months ago
The stock loss came up because he asked, not because I volunteered it or insisted that it be claimed. That said, being that it never needed to be claimed in the first place and doing so WAS to my financial detriment, which had to have been VERY obvious to him given that my return was SO simple and straightforward (I had a paltry income from one source and this stock loss) shouldn't he have let me know that that I wasn't obligated to claim the loss and that doing so actually would reduce my refund by a substantial amount? Otherwise, it seems to make his input of information nothing short of robotic. Personally I used an accountant (vs. a free software program) because I thought I was dealing with someone with some measure of insight that would provide advice where appropriate, which in the situation I describe was certainly warranted... Am I to take it that tax preparer's have NO responsibility or affirmative obligation to offer their clients advice in suggesting what is or is not most advantageous (as long as being compliant with tax law) in the preparation of their tax returns? If that is the case, it seems that there is simply no need whatsoever for accountants as tax returns can easily be generated and at a much lower price, if not free. It just seems counterintuitive that he didn't have some responsibility to tell me that I didn't have to claim the loss and doing so would lower my refund by about 20%, which served to only MAGNIFY an already huge loss that I was never able to afford in the first place...
Tax Professional: Barbara, Enrolled Agent replied 5 months ago

With all due respect, this is not the forum to debate your tax preparer's actions in your situation. I was not present and not privy to the conversation.

I will opt out so another expert can assist you.

Thank you and have a great day!

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Tax Professional: Lev, Tax Advisor replied 5 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,335
Experience: Taxes, Immigration, Labor Relations
Verified

Different expert here...

back to your original question - we need to conclude that

-- you are correct - you are NOT required to use capital losses to offset your other income

-- however - if you choose not to use losses the amount you are eligible to use will NOT be carried forward.

-- you are not required to use any specific tax preparer - and you are not not required to use ANY tax preparer - that is your choice.

-- if you choose the tax prepare - there is a service agreement between you and the service provider that describes responsibilities of both parties.

-- it is possible that the tax preparer made mistakes or incorrectly interpreted information you provided - and in this situation you may be entitled for compensation.

-- thus - you may request a compensation for damages - and how the dispute is resolved is based on your agreement - I suggest to look in documents you provided - most likely you should have a copy of such agreement

-- you may specifically request your tax prepare to compensate your damages - the best option will be to negotiate, but if that is not possible - you may sue your tax prepare for damages - you just need to provide supporting documents to the court.

Questions?

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Customer reply replied 5 months ago
Thank you for your input Lev. The whole point of my original inquiry was to find out if I am able to file an amended return back to the year when the loss was originally claimed. Barbara couldn't have missed the point of my questions more if she tried. It was never meant to be a forum on my tax preparer, but my trying to find out if I could undo his mindless mistake. Frankly, she could not have been more INeffective because had she bothered to ask some basic questions she theoretically could have quickly and easily given me the answer that I sought, assuming she even know. In the interim since my last post (feeling Barbara's "assistance" was useless) I dove in deeper doing my own research and found the answer to my question in 26 U.S. Code § 6511(d) (1) which specifies that the standard statute of limitations in filing amended tax returns is extended to seven years meaning I CAN in fact go back and undo this lazy, unthinking mistake on the part of my tax preparer. Utterly ridiculous that Barbara as a so-called "tax professional" couldn't have answered the question I posed in the first place in a quick and straightforward manner... So while she obviously couldn't do "the job" I do appreciate your willingness to step up where she failed, but again I did manage to finally answer my own question. As such, I want to at least thank you for the effort.
Tax Professional: Lev, Tax Advisor replied 5 months ago

In general - there is NO statute of limitation to amend past tax returns.

the statute 6511 is related to claim a refund - not to amend.

So if you plan to claim a refund for past years - the statute of limitation is three years.

6511(d) (1) is related to Seven-year period of limitation with respect to bad debts and worthless securities

https://www.law.cornell.edu/uscode/text/26/6511

and based on your information you do not plan to add any of these to your amended tax return.

So far - you are limited by three years if you want to claim any additional refund.

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