Our New York City tax firm provides updates on tax issues for self-employed and other investors. The IRS allows you to claim a capital loss (not a bad debt deduction). 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.

Here are some additional tips:

  • 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 worthless securities on Form 8949, Part I or Part II, whichever applies. Indicate as a worthless security deduction by writing Worthless in the applicable column of Form 8949.

If you have questions about claiming worthless stock capital losses on your freelance taxes or self-employed taxes, contact our NYC CPA for additional guidance.