how do I write off worthless stock if I don't have any forms, e.g., 1099?

[Vanessa A]

If your stocks are truly worthless and you are abandoning all rights to them, then you claim the loss by entering them as a sale of stock with a sales price of $0 and the cost basis of what you paid for them. 

 To do this you will select the following:

• Federal
• Income
• Show More next to Investment Income
• Start next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)
• Walk through the steps of entering a 1099-B with the information you do have.  You will need to select long term basis did not receive form 1099-B
• Enter $0 for proceeds and then your cost basis (number of shares x $2)
• Select I need to adjust my total cost basis and the select letter S for loss of worthless small business stock.
• Hit continue.

TurboTax will likely tell you that you will need to mail your paper copy to the IRS.  This will likely delay processing of your return.  Since you do not have a 1099-B, you can mail a copy of your stock certificate, evidence of when it became worthless, evidence of your basis (ie. proof it was in lieu of payment). 

If it was not for services or as any type of payment, then no, you would not be able to claim it as worthless since you did not give anything to get anything from it. 

If you own securities, including stocks, and they become totally worthless, you have a capital loss but not a deduction for bad debt. Worthless securities also include securities that you abandon. To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it.

• Treat worthless securities as though they were capital assets sold or exchanged on the last day of the tax year.
• You must determine the holding period to determine if the capital loss is short term (one year or less) or long term (more than one year).
• Report losses due to worthless securities on Schedule D of Form 1040 and fill out Part I or Part II of Form 8949. Losses (homes, stocks, other property)

[bob4texaco]

I'm using the TurboTax Online Premium 2024 software, so I think there are slight differences with the method you described, namely, there's no specific:

"Select I need to adjust my total cost basis and the select letter S for loss of worthless small business stock."

options available, but I was able to ultimately get this info in with alternate menu selections. There was, however, no mention of mailing in a paper return. That said, if I do mail in my return, is there a way to let the IRS know that I otherwise used Turbo Tax software to prepare my return? As it would be more reassuring in the IRS knowing the accuracy of the return.  And would I somehow be able to track my return via Turbo Tax software? (thinking not, but compelled to ask).

Thank you!

[AmyC]

1. If you have the 8949, the forms are correct, and you can efile, great. If you are printing the forms, they are self-prepared regardless of the software used. 

2. You can track a return that has been mailed in. It just needs time to get there and be inputted- about 4 weeks. See Where's my refund?

[TXLandlord99]

Thanks for your post.  I have the same question about bad debt. I issued a load (with appropriate paperwork) and the other party has defaulted. I have no 1099 forms from NextSeed. So, how do I write off the bad debt?

[DaveF1006]

You can write it off as a capital loss in the following manner.

1. Go to Investment Income, Stocks, Mutual Funds, Bonds, Other. 
2. Answer NO to the 'Did you receive a 1099-B for this sale'.    
3. When you begin to enter the sales information, the cost (basis) is the amount of your worthless loan and the proceeds are what you have received on the loan, $0.    
4. The description should have the name of the debtor/loan info.    
5. Date Sold is the day it became worthless. Must be in 2024 to file this year's return.