Home | Tax Blog | Tax Evaluation | Resources | Common Tax Questions | Back Taxes | Contact Us

How to Manage Your Taxes When Stock Investments Fail

September 9th

stock market taxesSince 2008, it has become a commonplace occurrence to see companies failing and stocks crashing. For many investors, the past couple years have seen substantial losses. But what does this mean for your taxes?

In most cases, if a taxpayer invests in a company that fails, the stock loss can be taken as a tax deduction. It is generally considered a ‘capital loss,’ and is therefore subject to any of the standard rules governing this area of tax law.

However, here are a few other tips to help you navigate this uncomfortable situation:

1. Worthless Securities

To qualify as a “worthless” security, shares but be actually worth nothing, not just trading for pennies on the dollar.

2. Documenting a Stock Loss

Many taxpayers suffer confusion as to how to document a stock loss of this magnitude. However, with this kind of loss, it is generally a bit simpler to manage than with other kinds of capital losses. In some cases, the brokerage will supply a letter documenting the stock’s lack of value. In other instances, the brokerage might, for a fee, buy back the stock for a nominal amount.

3. When to Claim Stock Loss

Stocks that became totally worthless during the course of the year are typically treated as having been sold on the last day of the tax year. However, if an individual neglects to claim a worthless-security loss on the appropriate return, there is still time to rectify the problem. By filing an “amended” return using IRS Form 1040X within seven years from the date the original return was due, taxpayers can rectify past oversights.

Check with a tax lawyer for more information on navigating the details of an “amended” return. It is also helpful to review IRS Publication 550, which discusses declaration of stock loss.


Subscribe Now

Follow on FaceBook
News & Events
Monday, August 01, 2011

We are excited to launch our new site LeeTaxHelp.com.
Monday, September 05, 2011

If you think you might be need the advice of a Dallas Bankruptcy Attorney you can view on sister site at http://leebankruptcy.com
Back Taxes (5) General Tax Information (65) News (39) Payroll Taxes (5) Tax audit (10) Tax Debts (3) Tax deductions (16) Tax Fraud (4) Tax Laws (14) Tax Liens (10) Tax payment plans (14) Tax programs (21) Tax Scams (6) Uncategorized (2)
Recent Posts
Advantages of Using a Tax Debt Lawyer
Tax Debt Relief In 2014
Tax Debt Installment Agreements
Understanding the Five Tax Debt Strategies
Back Taxes: What You Can Do
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011