Suppose someone has some incorrect info in their 1040 filing, but correcting it would not change the owed tax for that particular year. It does impact the amounts carried forward to the next year, and thus could impact the tax amount in that year or future years. (One example would be the amount of capital loss. The amount that can be used to offset earning income is capped at $3K a year, so the difference between one amount above $3K and another amount above $3K would have no impact in this year, but would impact a future year when there’s a capital gain or the carried loss drops below $3K.)
Question is, in such a circumstance, do you need to bother filing an amended form with no impact on the current year so as to conform to what you’re going to file next year, or can you let this year’s filing stand and use starting numbers next year which are accurate though inconsistent with this year’s filing?
[Something along these lines happened to a woman I know.]
I am not a tax professional but I have done my own taxes for 38 years with varying complexity, including CG carryover.
You should file the amended return if data you report on a future return will not match data on the return you file this year. I do not know the likelihood, but the IRS performs many automated checks and if you are claiming a carryover based on losses that you didn’t report it could possibly raise a flag.
I was speaking to my father today and I asked him this question. He is a former tax accountant. (He worked mostly on the corporate tax side, but he’s very familiar with tax processes and the IRS - early in his career he worked for the IRS assisting individuals with tax filing issues - and he’s always filed his own (rather complicated) taxes, working out the numbers with a calculator etc.)
He was pretty firm in saying that a person in that situation should not file the taxes again for no change in tax/refund. Firstly, he scoffed at the likelihood that anyone is checking the starting capital loss numbers compared to the prior year, and said even if someone did raise the issue you could just explain what you did pretty easily. But he also said “you’d make them crazy”, by which he seemed to be saying that the IRS people are not set up to deal with this type of situation.
What I can add is that while I was never in this exact situation, I once mailed a 1040X which changed the carry forward capital loss numbers, and almost immediately after e-filed a 1040 for the following year based on the 1040X numbers - it went through without a problem.
It’s always a good idea to ask a former tax accountant before you post a question to an anonymous Internet board, no matter how well-intentioned the responses might be.
I once received an audit notice due to what was read as an irregularity in my capital gains data, so I am particularly sensitive to the topic. It took me hours to compile the information needed to show that some idiot auditor was reversing the cost basis and sales proceeds. I got a short letter saying the matter was resolved.
It was not related to an amended return. If they don’t check, they don’t check. But every day people are surprised by what they *do *check.
My father is a very educated person on this matter, but I don’t know if he would be an authoritative expert. His experience with the IRS is many years ago, and his more recent experience is as the lead tax guy for various corporations.
I thought I might get opinions from professionals who have direct experience or knowledge about these matters. E.g. people who are in the individual tax-preparation business or who can point to IRS regulations or something like that.