Do I Have to Report All My Stock Purchases & Sales if I Lost Money?

When you sell stocks, your broker issues IRS Form 1099-B that summarizes your annual transactions. While you do not have to report money you lost because you do not pay tax on it, agents at the IRS expect to see details about your stock sales on your return, because Form 1099-B does not show whether your sales were gains or losses. Failure to include transactions, even if they were losses, could raise concerns with the IRS.

Form 8949

You must fill out IRS Form 8949 to provide details about your stock sales. Include the original date of purchase, the sale date and the amount you gained or lost. Enter stocks you held for one year or less into the first section of the form, and enter stocks you held for more than one year into the second section of the form. Stocks held for more than one year incur a lower tax rate than stocks held for less than one year. Even if you lost money, you must divide the stocks according to how long you held them, because the IRS will treat those losses as either short-term or long-term.

Schedule D

You need to transfer your figures from Form 8949 to Schedule D. You should not list your losses separately from your gains. Simply place parentheses around losses to indicate that the figure is negative. Figures without parentheses count as gains. Total the column by adding in the positive figures and subtracting the negative figures. This resulting figure indicates your total loss or gain.

Capital Loss Carryover

You can deduct up to $3,000 in losses off or your income for any given tax year (as of July 27, 2012). You can apply the remaining losses to coming years when you file your returns for those years. Losses retain their original short-term or long-term status when you carry them over to coming years, so you will save at the tax rate assigned to each type of loss. You can claim the losses each year until you have used up the total amount you originally lost.

Record Keeping

You need to know your cost basis. That is the price you originally paid for each stock. Brokers, banks and mutual funds seldom include your cost basis on statements. This means you have to carefully record the date of each purchase, so that when you sell it, you know if it qualifies as long-term or short-term. If you buy and sell many stocks, trying to reconstruct the purchase dates on all of them at the end of the year can be daunting. Note the purchase date in a spreadsheet or notebook. The Internal Revenue Service requires this information, and it is up to you to keep track of it.

Matching Amounts

You should check to make sure that the figures on your 1099-B, Form 8949 and Schedule D match. The IRS will perform this check, so you should too. This helps catch any math errors or inadvertent omissions so that your tax return won’t raise any red flags with the IRS.

Photo Credits

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About the Author

Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.

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