Canuckbusiness

Start a business, Do your taxes, Save money

How do I write off a capital loss from a previous year?

Which forms and lines should I be using to offset my 2011 capital gains with capital losses from previous years?

We have Jeff to thank for this post. He emailed me and asked this question. I like hearing from people like him because sometimes it’s tough for me to know exactly what kinds of things would be useful for folks out there. So don’t be shy people! Send me your questions and if I know the answer I’ll make a post of it.

So…here is the situation: You have a capital gain in 2011 and you have capital losses from a previous year (or years) and you want to use them to offset your 2011 capital gain.

If you are using TurboTax (or any other software really), open up the Forms explorer and type in “loss” in the keyword search box. One of the matching terms that come up should be “Loss Worksheet”. That’s where you want to go.

Once you’ve found the Loss Worksheet, scroll down a little more than half-way to the section called “Net Capital Losses”. Look at that table and see if there is a record of the old loss in the first or second column. You would then go to the “Claimed in 2011” column in line with it and enter how much of that old loss you want to use to offset your 2011 gain.

However, if there is nothing in one of those first two columns, then it means one of two things:

1) You have not been using the same software each year and so it hasn’t updated your carryforward loss amounts. If this is the case, contact CRA and request your “Net Capital Loss carryforward amounts”. Then plug these numbers in.

OR:

2) You never reported the loss in the year it occurred. If this is the case, you must adjust your tax return for the year in which the loss occurred before trying to use that loss to offset current year gains. (so you have to file a T1 Adjustment Request).

Keep this post handy…tax season is always closer than we like to believe!

December 5, 2011 - Posted by | Personal Tax, Running Your Business, tax | , , ,

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s