I have bought and sold several stocks over the past 6 months.Overall I lost a little money. How do I pay taxes

Question

Do i need to pay taxes? A few stocks I made money on and a few I lost money on. Overall I am down a few hundred dollars. I really dont know how this works. When do I pay these taxes. Also where are the forms I need. Thank you.

I am a college student , and I am still a dependent. Also, I have only made a few hundred dollars from a job on campus if that matters.

I double checked and my first trade was in January. Does that mean I don't have to worry about this till I get the forms next year? Thank you.

THANK YOU EVERYONE FOR THE HELP!!!!!!!!!!!!!!!!!!

Answer 1

You account for all the stock sales during the year after the year is over. They are reported on Schedule D of your 1040 income tax return. Stocks held for more than 1 year before selling are long-term, stocks held for less 1 year are short-term. You can offset losses against gains, and if you had net losses then you have no tax problem as far as the stocks go, and can deduct up to $3,000 in losses in any year ($1,500 if married filing separately), any excess is carried forward until used up at the $3,000 per year. You can go to www.irs.gov to download the 2007 tax forms (1040, and Schedule D, and possibly others) when they are available on the website. Also do the same with state income tax (state rules regarding stock sales and losses will probably be different than the federal, but since I don't know what state you live in I can't tell you what to do exactly for your state return).

Answer 2

I'm not sure if you necessarily need help from someone else - although probably a good idea if it's your first time filing. At a minimum you should be using one of the tax softwares. First up, you don't need to do anything until tax time early next year.

You will need to tell the IRS how much you paid for each stock and what you sold each stock for. You will add up the difference for each stock and then sum the total. Since you said you lost a bit of money, that total should be a negative number. The IRS lets you offset your income up to $3000 for any losses within a year. So if you made $15,000 in wages over the year and had a total loss of $1000, you would only pay federal/state taxes on $14,000. If your withholdings are correct, you would probably get a tax rebate. Now if you lost over $3k, you can apply those losses to future tax years.

I have friends who will be taking the token $3k loss for many, many more years due to the 2001 .com bust.

My answer is based on using 1040 form. As a college student you are usually in 1040EZ territory. Since you trade in stocks, you probably will have to use form 1040.

One last thing - you probably shouldn't be putting money in the market until you're out of college. There are many sites that let you use virtual money.

Answer 3

You'll need to file a tax return on a form 1040, and include a schedule D showing all of your stock trades, both gains and losses. If you lost a little overall, and your other income for the year was just a few hundred dollars, you aren't likely to owe any income tax to the feds.

You'll file the return between January and mid-April of 2008. You'll be able to download the forms at irs.gov - they aren't out there yet, since they haven't been finalized and probably won't be for another couple months.

Answer 4

You pay taxes on the stock sold when you do your taxes. You will probably get forms from the broker or brokerage place you did the buying and selling in January or February which you need to give to your tax preparer. The tax preparer will add the information to your tax form and figure out the capital gains (how much money you made when you sold for more than you bought for) then will figure in the losses on the stocks where you lost money. It is possible the losses will cancel out the gains. Don't try to do your taxes yourself. If you didn't know that you would need to pay the taxes on this by the April 15 annual deadline, then you don't know enough to do your own taxes and could cost yourself a lot of money in penalties, etc. later. If you receive any statements or closing announcements regarding the stocks you've bought and sold keep them all together and give them to your tax preparer with your year end statements. That way he/she can figure it out without missing any information.

Answer 5

You take a loss. The question you have to ask yourself (and do some research on) is whether the stock has prospects for rebounding. Unless you are making a living day trading and looking for penny increases, then you should be looking at stocks as a long term investment. Stocks are inherently volatile (some more than others), but the ultimate price is dependent upon future prospects - if the stock is a good company in a growing industry, more than likely (all else equal) the price will rebound. If you have a dog in a contracting industry, then you get out now. Try to find analysts opinions, future projections, look at the major industries the company is in and what its positions are (are they the tail ender in a lagging industry or a leader in a growing industry or somewhere in between).

Answer 6

If you're still a dependent, try and get the people who prepare your parents return to prepare yours.

You'll need to file Form 1040, but if you're going to file on your own you should get Turbo Tax at Office Max, Staples, Target, etc. It'll guide you through everything.

You report your gains and losses, and you can use your losses (up to $3,000) to offset your other (i.e. wage) income to reduce your taxes. Because you made so little money you probably won't owe any tax anyway.

In January 2008 you'll get a form in the mail called a "1099" that details all your gains, losses, dividends, etc. You'll need this and your W-2 to prepare your taxes. Any income you receive in 2007 will be filed on your 2007 tax return, due April 15, 2008.

But again, you're best off getting your taxes filed by a CPA or whoever prepares your parents' return.

Answer 7

If you lost overall, thenshould,have no tax. you just have to show that on the forms. I would use a service to get it right

Of course when the FAIRTAX ACT H.R. 25 passes, you will have no income tax. check it out. www.fairtax.org

Frequently Asked Questions about the FairTax http://www.fairtax.org/fairtax/faqs.htm