How to Declare Loss With Worthless Securities
- 1). Gather documents related to securities. You need to gather all documents relating to the original purchase of the securities and their sale. You will need these documents to prove how long you held the securities and the amount of loss you recorded.
- 2). Complete Schedule D. Securities are capital assets, so when recording a loss you will need to complete a Schedule D which should be filed with your completed tax return. Follow the instructions closely, as the form will help characterize the losses as long-term or short-term, as well as whether the loss is capital or ordinary.
- 3). Record information from Schedule D on 1040. The completed Schedule D will be used to arrive at the number which goes on line 13 of your 1040, which is included as part of your taxable income.
- 4). Submit completed Schedule D and 1040 to the IRS. This will not only allow you to comply with their current year reporting requirements, but will preserve losses for future year tax benefits. Be sure to send the return to the appropriate IRS field office, which is determined by where the taxpayer lives.
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