Amending to add margin interest but Form 4952 didn’t generate

shoenberg3

I’m amending 2022 and 2023 to report margin interest so I can carry it forward. Used FreeTaxUSA, entered the interest, but Form 4952 didn’t show up in the amended forms. No change in tax since I’m still taking the standard deduction. I believe that I should have significnat carry forward left because all of my sales were long term capital gains, and my margin interest for year 2022 was over 17K (which I failed to report in few years ago).

Questions:

1. Is it fine to fill out Form 4952 manually and include it with the 1040-X so the carryforward is recorded?
2. Do I need to fill out something similar for California state taxes (form 540 I think)?
3. Should I mail 2022 and 2023 amended forms in separate envelopes to the IRS?

Thanks for the help!!!

MatthewD

Hi Shoenberg3,

We support the Form 4952. If you are not seeing it on your return your information may not be meeting the conditions to use Form 4952. https://www.irs.gov/pub/irs-pdf/f4952.pdf The IRS says:

"You don’t have to file Form 4952 if all of the following apply.
• Your investment income from interest and ordinary dividends
minus any qualified dividends is more than your investment
interest expense.
• You don’t have any other deductible investment expenses.
• You don’t have any carryover of disallowed investment
interest expense from a prior year (like 2021 or 2022). "

I recommend that you sign into your account and contact Customer Support so someone can look at your 2021 and 2022 amendments.

You could fill out the Form 4952 and include it with your amendment. CA uses a form 3526 for Investment Interest Expense Deductions.

You can use the same envelope to mail the two years. You could mail them priority mail in separate envelopes for tracking purposes.

shoenberg3

Thank you very much for the response.

Yes, I do not have carry over from prior year but I AM trying to amend so that I can notify IRS of the carry over for interest in 2022 and 2023. In that case, would it be appropriate to fill out Form 4952 and include it with the 1040-X (along with statements from broker)? Anything else that I would need to send to the IRS?

MatthewD

Hi Shoenberg3,

To get specific help for your 2022 and 2023 into your account and contact Customer Support so a support agent can look at your accounts and amendments.

Yes, it would be okay to fill out the Form 4952 and include it with your amendment to report the carryover. CA uses a form 3526 for Investment Interest Expense Deductions.

shoenberg3

Yes, I am also getting support from FreetaxUSA on my account, but sometimes, their answer is not the most comprehensive or thorough. Therefore, I really appreciate your additional feedback and help.

Would the following be sufficient?

1. The forms (1-3) generated by FreetaxUSA including 1040x and supporting forms
2. form 4952 filled out by myself
3. Relevant brokerage statements to demonstrate the investment expense

Do I have to send 2022 and 2023 amendments to IRS separately or on the same mail?

Thank you so much for the help

shoenberg3

Something came up while I was attempting to fill out the form 4952 that may mean I have nothing to carry forward at all…

I do have around 100K+ capital gain from 2022 but I used standard deduction (not itemize), so I did not fill out form 4952 at the time. Looking at part II of form 4952, it looks like I would put in my cap gain for 4d (if I am not mistaken), so that leaves me with no available carryforward from 2022? And I can't get a refund either because I used Standard deduction?

Thank you for your help

MatthewD

Hi shoenberg3,

Yes, by sending in the 1040X along with Form 4952 (showing the carryover) and any relevant supporting documents is generally sufficient.

Thank you for the additional information. When you have a capital gain greater than your Investment Interest Expenses (2022 Form 4952, Line 3) then you have no carry forward.

See the 2022 Form 4952 Instructions here. Form 4952