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Answer:
Dear
BuyandHolder,
Unfortunately,
you cannot literally get it back, but you may be able
to get a tax break. Here's how.
Schedule
D
If
you sold a stock last year, whether you made or lost
money on it, the IRS requires you to file Schedule
D along with your Form 1040. Schedule D is a pretty
long form, with many lines and calculations, so you
may want to get professional help filing it out, especially
if number crunching is not your strong suit.
In
your particular situation, because you lost money
last year, you can use Schedule D to offset any gains
you made in the market or -- and this is important
-- if you have no gains, to offset a portion of your
ordinary income. (Ordinary income is income
that does not qualify as a capital gain. Translation:
Income from wages, interest and dividends as well
as net income from a business.)
What
to report on Schedule D
Here's
what you must list, whether you sold at a profit or
loss:
-
The name of the stock
- The
date purchased
- The
date sold
- How
much you sold it for
- How
much you bought it for originally.
Reporting
gains
The
last dollar amount, how much you paid originally,
is known as your basis. You then subtract the
basis from the sales price to get your gain.
If
you owned the stock a year or less and had a gain,
you wind up paying more in taxes than if you owned
it for a longer period of time. That's because assets
held short term are taxed at the same rate
as regular income. Currently there are six such rates:
10%, 15%, 25%, 28%, 33%, and 35%.
However,
assets held long term (366 days or more), are
taxed at a special lower rate -- either 5% or 15%,
depending upon your income in the year sold. So for
most people, it obviously pays (in terms of taxes)
to hold onto assets for more than a year.
Reporting
losses
The
information you must report to the IRS pertaining
to stock losses is the same as for stock gains.
And,
if it turns out you lost more than you gained during
the tax year (which is what happened in your case),
then you can claim up to $3,000 of your losses
against your regular income -- as reported on your
1040.
$Tip:
If you lost more than $3,000, there's more good news.
Larger losses can be carried forward and used to offset
market gains in future years or if there are no future
gains, to offset ordinary income. You can go through
this carry forward procedure until you've completely
eliminated your $3,000 loss.
For
Further Information:
Check
out the information at: www.IRS.gov.
The Web site has become more user-friendly in the
past year, with considerably more material written
in plain English.
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