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TL;DR-ish

Can I use any part of my situation to carry forward any amount of refund to next years? It seems so silly to have so much locked up in refunds and then owe penalties when they've had excess money from me the whole time. Any way that can work for me? I file 2020, 2021, 2022 in one go? Any of these bankruptcies work in my favor? Can I claim 100% loss and then if I get anything claim it as income?

My reading says 'no.' At the same time I can't believe I will probably owe penalties potentially for 2022 and can't apply any amount of refund from any year prior.

Situation

  • 3 years behind on my taxes (max for refunds)
  • Sadly my real excess withholdings and write offs have somewhat passed (2017-19)
  • Mining crypto, I put all mined assets into Celsius; Celsius went bankrupt 2022, still ongoing
  • Multiple (2) companies invested in pre-IPOs which went public and filed for bankruptcy, ongoing

My original plan: mining had a lot of write-offs, my intention was to take $3k or less of my refund aand apply the remainder to the following tax year. I found when filing my 2017 late, the IRS effectively said "no" giving me a check for the full refund. I waited to receive this before filing my 2018. I repeated. Same thing. 2019... same thing.

2020 is a wash. 2021 I actually had real income for mining. I had been using a site to determine my estimated income and hadn't sat down until filing these returns to get a good gauge on my actual income. Sadly the sites were off... by a lot. I'm thinking my than likely my additional withholding, requested in my W4s, in 2021 will offset this income despite not being able to carry forward any amount of refund to apply to later years.

I'm not expecting to see any refund applied to 2022. Since it hasn't worked so far. Again I'll try. Crypto did well for a bit in 2022 until the crash of LUNA. So my mined assets at Celsius apparently generated ~$10k declared in a 1099-MISC. Assets locked in bankruptcy, pennies on the dollar at some point.

The reason I got behind on my taxes: wasn't sure how to handle crypto; seems most accountants don't want to touch mining. Reason I stayed behind: waiting until the prior year is processed before filing the next. 2017 was submitted in 2020... took over a year to get back; 2018 to 7 months. 2019 was fast, so hopefully they are back on track.

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  • Can you clarify about whether you will be getting a refund or owe a payment, for each year's taxes?
    – user102008
    May 25, 2023 at 17:50
  • Honestly it's an unknown. More than likely 2020 might be on edge. I don't have much income and unemployment doesn't withhold much. 2021... toss up. I did get a lot of mining income but the site was so far off, coupled with additional withholding I elected for and mining write-offs...I'm probably fine. 2022 would've been fine sans the $10k misc income. I can't recall if I kept my additional $100/bi-weekly check withholding. I have minimal mining use. (For comparison my withholding in 2021 was $1000/check). More than likely that withholding can cover any issue I might have in 2022. May 25, 2023 at 19:05

1 Answer 1

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Your post is a bit all over the place, but you're clearly anxious so I'll try to explain what I understood from your question.

Late Filing

The only excuse for late filing is you being in a coma, anything else warrants penalties. You can ask to waive the penalties on the first occurrence (first time abatement), after that you're seen as a responsible adult and charged penalties if you're late.

Carrying refunds forward

You can do that in a timely filed return, but not if the year to which you're carrying forward has already passed. You're basically trying to backdate a tax payment. You're filing your 2017 return in 2020 and are trying to "carry forward" the refund to 2018 so that you could claim on the 2018 return you'd be filing in 2021 that you paid that amount timely. But you hadn't. That's why the IRS didn't let you do that.

Bankruptcies

You can write off the bankrupt investment in a year it becomes final. Since both are still ongoing you cannot write them off just yet.

Crypto

Accountants not willing to touch that is not the IRS problem, the IRS did issue guidance and it is now fairly settled (and has been for a while).

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  • "anything else warrants penalties" However, there is no late filing penalty if they are getting a refund.
    – user102008
    May 25, 2023 at 17:51
  • "You can do that in a timely filed return, but not if the year to which you're carrying forward has already passed." Do you have any source for this? Form 1040 instructions for line 26 says to include an overpayment from the previous year tax return that was applied to the current year, and form 2210 instructions for line 11 says to treat it as paid on April 15. It does not say anything about the previous year tax return needing to have been timely filed.
    – user102008
    May 25, 2023 at 17:55
  • @user102008 I've not been able to find the explicit IRM quote on that to show to you, but generally you cannot submit estimated payments after the tax due date for the year. Carrying forward the refund counts as an estimated payment. The law (IRC Sec 6402) allows carrying the refund forward, but doesn't mandate it, so it's up to the IRS whether to accept that or not, and in this case it's reasonable for them to not accept the election.
    – littleadv
    May 25, 2023 at 18:52
  • But if you have a refund from a given year, that means the government had the money as of the April 15 deadline (i.e. you overpaid that amount by April 15). Even though you filed the tax return late, and thus the amount overpaid was not known, when you did eventually file, that amount (which the government had on April 15) is retroactively known to have been overpaid as of April 15. So there is no reason why it can't be retroactively designated a payment for a future year, paid on that April 15.
    – user102008
    May 25, 2023 at 20:25
  • @user102008 that's also a good point. It would be interesting to see the IRS explanation for their decision to reject the request. One argument would be that since you didn't explicitly authorize them to move the money to next year, the government didn't have the opportunity to use it, and the year now has passed.
    – littleadv
    May 25, 2023 at 20:31

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