Pushing the time limit for amended tax returns

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boomer_techie
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Pushing the time limit for amended tax returns

Post by boomer_techie »

( I wanted to put this as a follow up to whatever thread had the key information I needed. But I can't find it!)

I essentially just amended a 2013 tax return - and received refund checks! You're saying "Wait a minute! Isn't that way beyond the three year time limit?" Correct. The key detail is that the limit applies to the year that a tax payment or refund is paid or received.

Here's what happened: In 2013 a security was sold out from under me at a loss. (It went private.) As it was an uncovered security, the basis wasn't listed. At the time, I couldn't find the trade confirmation from when I acquired this security. Thus, my 2013 taxes were filed with an incorrect basis. I always intended to hunt for the trade confirmation and file an amended return. Years passed. The three year limit came and went. I finally found not the trade confirmation, but a monthly statement showing the original purchase. I used the information to recalculate my 2013 taxes, and every year forward.

The important detail is that in 2013 I had a sizable (long term) capital loss that I was slowly whittling down. That loss was finally used up in 2016. Changing the 2013 form 8949 and Schedule D simply increased the capital loss being carried forward. The $3000 of loss being used up didn't change. Thus the 2013 taxes didn't change. 2014 and 2015 also didn't change. The first year with a change was 2016. A portion of the loss now also carried forward into 2017.

Thus in actuality, I amended 2016 and 2017 and received refunds for the changes in both years. I got the paperwork sent in before the three year deadline (for 2016) earlier this year. To the 2016 amended return, I attached the revised 2013, 2014, and 2015 Schedule D's. In the "explanation of changes" on form 1040X, I didn't write prose. Instead, I listed every significant line with a change, listing the original, net change, and correct(ed) values.

The TLDR summary: Just because a tax amendment is outside the three year window, doesn't mean that it can't affect more recent years' taxes.
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Stinky
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Re: Pushing the time limit for amended tax returns

Post by Stinky »

Very interesting.

I assume that you haven’t gotten any queries from the IRS about your amended 2016 and later returns?
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boomer_techie
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Re: Pushing the time limit for amended tax returns

Post by boomer_techie »

Stinky wrote: Wed Sep 16, 2020 6:51 am Very interesting.

I assume that you haven’t gotten any queries from the IRS about your amended 2016 and later returns?
The IRS (and state) accepted the amended returns and sent checks. The feds have also now sent me "explanation" letters listing how much of each check was a refund and how much was interest.

I suppose someone could come back and double check the changes. The only issue might be if they don't have a record of the 2013 schedule D nor 8949 nor broker sent 1099.
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boomer_techie
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Re: Pushing the time limit for amended tax returns

Post by boomer_techie »

Stinky wrote: Wed Sep 16, 2020 6:51 am Very interesting.
BTW, I've found something with similar affect on my 2010 return. A change there would now ripple up to 2017 - so within amendment range. However, the change there isn't clear cut. It has to do with the minutiae of tax form instructions. I doubt I'll follow up with this one.

A question (gasp!): I have the tax returns all in spreadsheets. The files are named "Income 20nn". When I applied the amendments, I created spreadsheets named "Income 20nnX". Now that the amended returns were accepted, I should remove the X suffix so that these are on the main fork, while renaming the non-X files off the main fork. But with what suffix? (I do reference the older spreadsheets from time to time.)
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neurosphere
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Re: Pushing the time limit for amended tax returns

Post by neurosphere »

boomer_techie wrote: Mon Sep 14, 2020 2:22 am The TLDR summary: Just because a tax amendment is outside the three year window, doesn't mean that it can't affect more recent years' taxes.
Thanks for that detailed accounting (no pun intended, lol), and a reminder to people not to automatically dismiss "old" tax-related issues.

But let me change the wording a little. There was a tax event which happened, which affected multiple years of tax returns. You amended the tax returns which were still eligible. You did not make nor were you eligible to make amendments for those prior years. The prior year "amendments" were not necessarily amendments, but rather simply documentation/justification for the 2016+ changes.

So really, there was no amendment outside the 3-year window. There was distant tax event that affected many years of taxes, and amendments were filed only for the eligible years. :D Yes, I know we're saying the same thing. I'm not trying to be pedantic. Well, no, that's exactly what I'm being. But I don't mean to be a jerk. :wink:

Here's a (mildly) related anecdote. A taxpayer intentionally failed to report all income for many years. He decides to admit his guilt prior to being caught, writes a very long letter/explanation and files amended taxes for 6-10 years or so. Remember, there is no statute of limitations for fraud (although a lawyer would argue negligence in this case). Either way, taxpayer figured the sooner he admits guilt, does the math, provides the IRS with past due payments, etc, the lesser future penalties, interest, etc would be. The IRS deposited all the checks. But then months later the IRS "declined" the amendments which were outside the 3-year window and credited back the payments, stating that those years were not eligible for amended returns. So now he's waiting to see what, if anything, the IRS will do with that letter of explanation/admission. :)
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Re: Pushing the time limit for amended tax returns

Post by jebmke »

neurosphere wrote: Thu Sep 17, 2020 1:13 pm The prior year "amendments" were not necessarily amendments, but rather simply documentation/justification for the 2016+ changes.
Similar to filing a long history of after-tax contributions to an IRA by filing all the Forms 8606.
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