Schedule D has a worksheet in the instructions called the "Capital Loss Carryover Worksheet" that you should fill out each year. It's not submitted with your return, but it's the official way to calculate your carryover amount. Keep it with your tax records! There's one for 28% rate transactions and another for regular transactions. You can find it in the Schedule D instructions PDF on the IRS website.

Thanks for the tip! I didn't realize there was an official worksheet in the Schedule D instructions. I'll definitely download that and start using it instead of my homemade spreadsheet. Makes sense they'd have something for this since so many people carry losses forward, especially after market downturns.

I've noticed this too! The difference is usually because the summary screen might be showing your net capital loss after offsets, while Schedule D shows the detailed breakdown. Check Form 1040 line 7 to see the actual amount of loss being applied against your income this year (max $3k). The software is probably right, but it's showing you different stages of the calculation.

That's really good advice about documenting my attempts to get the W2! I've been asking them verbally every week but haven't put anything in writing. I'll send an email today and keep a copy. I didn't know about checking the IRS website for electronically filed W2s. I'll definitely create an account and check that out. Would it show up there even if the restaurant owners are new to filing this paperwork? Maybe they submitted it correctly to the IRS but just didn't know they needed to give me a copy?

Yes, documenting your requests in writing is crucial. Save copies of your emails or get a receipt for any certified mail you send. This protects you by showing you made good-faith efforts to get your W2 properly. If they did file electronically with the IRS, it should eventually show up in your wage and income transcript, but there can be delays, especially during tax season. New business owners might indeed have filed correctly with the IRS but not realized they need to provide copies to employees. That happens more often than you'd think. The transcript approach is worth checking, but it might not show recent filings immediately - sometimes it takes weeks or even months for newly filed information to appear in your transcript.

Good point! When I had this problem in Michigan, I just attached a copy of the federal 4852 to my state return with an explanation letter. But my friend in California had to fill out a separate state form.

Thanks for mentioning this! I've been tracking my dividends and capital gains, but I wasn't clear about what specifically counts as "net investment income" for this purpose. Are there any other categories I should be including? And does the order of operations matter - like do I subtract other investment expenses before calculating the limit?

Net investment income generally includes interest, dividends, annuities, royalties, short-term capital gains, and long-term capital gains. It doesn't include tax-exempt interest (like from municipal bonds), so be careful not to include that. The order does matter. You'd subtract investment expenses other than interest (like management fees) first to arrive at your net investment income. Then that becomes your limit for deducting investment interest. Publication 550 has worksheets that walk you through the calculation step by step - I'd recommend following those closely. The form that tracks the carryover amount is Form 4952, which you'll need to file with your return when itemizing.

The itemized vs. standard deduction choice affects whether you can claim the investment interest deduction at all. Investment interest gets reported on Schedule A (Itemized Deductions). If you take the standard deduction instead of itemizing, you don't file Schedule A, so you don't get to claim any investment interest deduction. So the process works like this: 1. Calculate your potential investment interest deduction (limited to net investment income) 2. Add this to your other potential itemized deductions 3. Compare total itemized deductions to your standard deduction 4. Choose whichever is higher This is why the OP can't carry forward interest from a standard deduction year - they never claimed it on Schedule A in the first place.

Oh that makes sense! I was getting confused between the investment income limitation and the itemizing requirement. Thanks for clarifying!

That's an interesting angle I hadn't considered. How exactly would I document it as a loan at this point? We've already processed the reimbursement as a regular transfer from the business account to my personal account a few months ago.

You'd need to create a promissory note between yourself and the company, with reasonable interest terms (look up the applicable federal rate for the time period), and have your board of directors (even if that's just you) approve it retroactively. Then reclassify the "reimbursement" payment as loan repayment in your books. Be aware that this approach works best if the amount was clearly definable and specific, like covering exact payroll amounts. If you've been mixing personal and business expenses regularly without clear documentation, this becomes much harder to justify. Also, don't forget to include any interest required on the loan when doing your taxes - even if you choose to forgive it, there can be tax implications.

This is a really good point. What type of business entity do you have, OP? The tax treatment can vary significantly based on whether you're running an S-corp, C-corp, sole prop, etc.

That's interesting! My vintage business will be expanding to sell some digital patterns soon. Do you know if downloadable sewing patterns would be taxable in Colorado? Or would they count as a non-taxable service?

Digital products in Colorado are generally taxable if they're considered "tangible personal property" in electronic form - like downloaded patterns, designs, etc. However, custom design work or services are usually exempt. For your sewing patterns, they would likely be considered taxable digital goods in Colorado since they're standardized products rather than custom services. But other states vary wildly on digital taxation - some exempt all digital products while others tax everything. The rules change constantly too, which makes compliance a huge headache for businesses like ours.

I've been using TaxJar for about 2 years and it's decent but not perfect. It sometimes gets special district taxes wrong in Colorado which then requires manual adjustments. If you're only selling in a few states it might be overkill. Avalara is more comprehensive but also more expensive.