I never entered capital loss carryover in the schedule D. How can I do now?

Question

Since I bought stocks from 1998, I have not entered the capital loss carryover in the schedule D. I bought $60,000 stocks from 1998 to 2002 , Then $40,000 lost, I have $20,000 stocks on hand. But I never filed the capital loss carryover in the schedule D (line 6), for example, 2005 year I claimed I lost $1500 on schedule D (line 7), I asked deduction $1500 on form 1040 (line 13). How can I make up this problem now? If I sell the rest of $20,000 stocks do I have to pay tax for this $20,000? How can I claim my $40,000 lost?
Thank you for your help.

Answer 1

File amended returns for the affected years. You still have time to do so.

Answer 2

I'm a little confused by your question. Are you saying you paid $60,000 between 1998 and 2002 for some stocks, but they've gone down in price and now you still have them, but they're only worth $20,000? Or have you been selling stocks also?

If you haven't sold them, but they've gone down to $20,000 from the original $60,000 that you paid for them, then you don't have a tax loss yet - that doesn't happen until you sell them. At that point, you can take $3000 of the loss in the year of sale, and carry over the rest to future years where each year until you use it up, you'd show whatever's left on a schedule D, taking $3000 of your net loss (including the carryover) each year on your 1040 until you use it up.

Answer 3

If you had capital losses from 1998 through 2002, you can amend those returns and carry the losses forward. If you have a carryover loss from 2002, you can then carry that forward to 2003, 2004, 2005, and 2006. You cannot request any refund of taxes paid prior to 2002, but you can request refunds of overpayments of taxes for 2003, 2004, and 2005.

The request for refund will expire for 2003 on April 17, 2007.

Answer 4

If you lost $40,000 due to the stocks declining in value, this is an "unrealized loss." Unrealized losses are not deductible. If you actually sold the stock at a loss, then you can claim up to $3,000 capital loss per year, and carry forward the remainder of the loss. You would need to amend any returns affected.

Answer 5

You can only go back 3 years from the due date to amend tax returns. - So get your 2003 return amended before April 16, 2007. Use Form 1040X - You don't say in what year you realized the big loss. (That is the year in which you actually sold the stock at a loss)- If it in occurred in 2002 (or later) and you showed a loss to be carried over on the return, you should be able to fix the later returns.