Essentially I deposited 10k at IB and lost everything.. The money here is not significant but im wondering if theres any way of getting some of it back in my tax refund. If you're curious.. I was breaking even for a few months and "rage quit" buy going all in on some weekly option. I know IB will issue a 1099b.. Will there be a single line that will just say.. (Loss 10k)? It would take many hours to reconcile each trade individually. The crazy part is that there were so many trades that maybe before commissions I was actually profitable.. in which case I would still be stuck with a tax bill? How much of my loss can be expensed? What are my options here?? A) ignore it and act dumb if they come back to me B) attempt to do full accounting C) take the maximum deduction allowed without showing all details? Thanks
The 1099 nets the PNL. Yes, you need to schedule and send in the return. You can take $3K against any W-2 earnings. You can ignore it as you're owed (against payroll, II, etc.), but it makes sense to take the $3K max against earnings.
Thanks, so if I take the 3k deduction, I don't need to reconcile every trade.. In this case I would be leaving 7k (10k loss) on the table.. How much of a cash refund am I missing out if I don't recognize the "entire" loss.. My taxable payroll earnings would be reduced by an additional 7k so my refund would be an extra $1000? or so? any estimate
If the difference between taking the regular 3k deduction and reconciling the entire 10k loss only comes out to a few hundred dollars on top of my refund.. It doesn't seems worth it to pay a CPA/pro hundreds of dollars to do it..
IB will send you a Form 8949 Worksheet that shows all your trades in a format acceptable to the IRS. You can upload that to Kinko's for printing. If it is a lot of pages, you can use back-to-back printing, maybe even two-up or four-up. In a worst case, you can burn the report to a CD and send that. As destriero said, you can write off $3k/year against other income and carry the balance into futures years. If you keep trading, you can net any gains against the loss carried forward.
I would just take my ending balance, subtract it from my balance on dec 31 2014 and enter it as a loss in turbotax. If you had a profit it would be different.