Made a mistake on my 2004 and 2005 1040 for capital loss carry over?

Question

In 2004 I put the incorrect amount of short term capital loss income carry over from my previous 2003 return. I entered an erroneous amount (less than what I should have put) because I didn't have my 2003 records to know how much I could carry over in 2004. Then in 2005 I was able to get my 2003 records to know what I should have put in 2004 as the carry over so I put in my correct carry over amount from 2003 minus what I deducted ($3000) from 2004 and put the accurate figures now in my 2005 tax return as the carry over amount BUT.. i mistakenly put it under long term capital loss carry over instead of short term.

I know this was very careless on my part and I'm not going to take my time next time and get things right but for the time being, does this warrant a tax audit? And should I fill out a 1040x to correct all this or does this even matter since they do have my 2003, 2002, on file to cross reference right?

I know I can use the 1040x to ammend it, but my question is.. is this even neccesary? It doesn't change the amount of return i got.. all it is doing is showing wrong information but doesn't affect anything in terms of what i'll get back or anything like that.

Answer 1

You can amend both years to show the correct numbers. Use form 1040X for this purpose.

Answer 2

yes, you need to amend the Schedule D for both tax years.

Prepare 1 1040X
Attache Schedule D 2003 mark in top right "as filed"
Attache Schedule D 2004 mark in top right "as filed"
Attache Schedule D 2003 mark in top right "AMENDED"
Attache Schedule D 2004 mark in top right "AMENDED"

In explanation of 1040X write that CF from 2003 was incorrect and that there was no effect on 1040 return for 2004 and 2005.

This will not trigger an audit. But will preserve carryforward in the event of an audit or subsequent review of your return by an auditor or by the IRS Computer.

Sign and mail it in. CERTIFIED MAIL RETURN RECEIPT