Sold stocks at a loss, schedule D, is it hard?

Quote from Cartier : I had stocks in Etrade from employee stock program that I had owned for a few years. I purchased the stock for about $40 a share and ended up selling them at a loss for about $20 a share. I did not put them on my tax form because I didn't want the hassle, and assumed I wouldn't owe tax at selling at that loss. The IRS has now sent me a bill for $300 which they say I owe because of that stock. I have to fill out a schedule D and a 8949, and they have alot of complex terminology I haven't used before. I'm giving a shot and reading all the directions and will try to fill it out myself to save the money of hiring someone, I hate to spend the same amount of money, but, just give half to the irs and half to some tax preparer.. My question is, and, the scenario seems fairly simple, I made very little taxable income that year for taxes from work (only about $12k), I sold stock I paid about $4k for about $2k. If it were not at a loss, the IRS would be entitled $300, At a loss of half it's value, would the amount I owe decrease? Thanks for reading through all the layman talk!

preface: i am not a CPA, just a average joe trying to help someone on a forum


Generally speaking, YES, a stock sold at a loss would REDUCE the amount of taxes you owe (just like generally a stock sold at a gain would increase your taxes). There is a limit to how much of a loss you can realize each year, and the remainder carries over to future tax years. The loss (in your case, 2K) i think reduces your taxable income by 2K. I do not know if there is special treatment for Emp. stock purchase programs.


EDIT: this seems like it may help you:
http://stockplans.morganstanley.c...INAL-L.pdf

Just to start here; I'm assuming you sold all of the stock you bought. You bought at $40 a share. The total cost of your shares is called your cost basis, i.e. what it cost you to purchase those shares, in this case it's $40 times the number of shares you purchased. The sale was at $20 a share, so your proceeds from the sale were $20 times the number of shares. Therefore, your loss was $20 a share.

You must file a schedule D when you dispose of property. Otherwise the IRS gets mad because sales are usually reported to them by brokerages, so they're looking for your sale already. Moreover, since you lost money, you can claim a loss against your other income, so it was in your interest to file the schedule D. You'll get money back.

Filing the Schedule D is actually surprisingly straightforward, especially if you're using a tax prep program. The only time it gets tricky is when your brokerage doesn't report your cost basis and you have a lot of lots (different purchases) of stock. If you know the date you purchased, sold, and the amounts involved, there's not too much else to know. So you'll have to do that.

As to what you need to do now, you'll have to ask a tax professional. I'm sure it will involve an amended return and a lot of extra paperwork.

EDIT: You really should consult a tax professional. You didn't file the Schedule D already and look where that got you; I would take this as an indication of where this can go. And this isn't a knock on you, *I* would certainly go for help in this situation. I wouldn't necessarily anticipate owing money, but you'll have to get a professional opinion. Lastly, never buy employer stock unless it's heavily, heavily discounted. And then sell it as early as legally possible.

Answer- you wouldn't owe anything at all. In fact, the IRS might owe you some money back. You need to file Schedule D and file them as Long term sales. you need to put date of purchase with the purchase price and then date of sale with the sale price. it should be fairly simple if you use a progam. Don't forget to mark your return as amended before you start so that it will calculate your refund correctly.

the loss you took is tax deductible. You record your loss on the schedule D and the yearly limit is 3k. If your losses were more than that, then you can claim 3k per year until all your losses are accounted for.

The IRS sent you the letter because your broker reported your sale as income. You were supposed to file your schedule D with your cost basis which would show the IRS that you took a loss.

Make sure to account for the cost of buying the shares and selling them into that total.