Income From Stocks

2009-08-10 by

Today TaxMama hears from Anna in Oregon, who is worried. “We received a letter from the IRS. My husband did not file for 2006 and 2007 because he did not make any money from his stock. I did file mine though. In 2008, my husband had a stroke, he is currently disabled and gets SSI. the Social Security Administration sent us a letter because they receive IRS alerts that he has unreported income from stocks. Actually, we are not getting a cent. The market is down and he lost a lot. We are in a big financial troubles just trying to pay the mortgage. So my question is: Are we going to lose his SSI, Our only financial source?”

Dear Anna,

It sounds like you’re having a tough time right now. I hope things improve for you.

But I have bad news for you. Yes, you are about to lose some of your husband’s SSI – if you do nothing.

After all, when there are stock sales that take place, even at a loss, IRS has no way of knowing you had a loss – unless you tell them.

Solving the problem is easy. Prepare your husband’s tax returns for those years and file them. Since he had losses on his stocks and little or no other income besides Supplemental Security Income, he probably won’t
owe too much money.

Why might he owe money?

Because when you are married and file separately, you lose the $44,000 tax-free portion of the SSI income. Suddenly, 85% of ALL the SSI he receives becomes taxable.
http://www.irs.gov/publications/p915/ar02.html#en_US_publink100097889

Now I have good news for you. What I suggest you two do is to take the notices, and all his data – and YOUR 2006 and 2007 tax returns to an experienced tax professional. Perhaps they can file amended joint returns for those years. That will probably make all the taxes go away – and IRS won’t touch his SSI income.

The fact that your husband is disabled does not mean that he stops filing tax returns and behaving responsibly. If he can’t do these things, it’s your responsibility to take over.

And remember, you can find answers to all kinds of questions about how not to lose your Social Security benefits and other tax issues, free. Where? Where else? At TaxMama.com

[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]

Download the MP3 (0:00min, 1MB) or listen now...

Ask TaxMama
Where taxes are fun and answers are free
www.TaxQuips.com
The number ONE free tax podcast online
IRS Publication 915
Chapter 2 - How much of my SS/SSI income is taxable?

# | Posted in Tax Quips | Comments » (3)



All Comments RSS

  1. Suzanne Metzger, CPA, CVA Says:
    August 10th, 2009 at 07:46 am

    TaxMama is 100% right on this one Anna but make sure to take in your Oregon state returns with you as well. If your taxable federal income overall goes down in 2006 and 2007 then you might also be entitled to state refunds depending on your situation. Good luck!

  2. meher der ohanessian Says:
    August 10th, 2009 at 09:54 am

    This is a typical situation that I have seen so many times. A taxpayer sells stocks at a loss and ignores to report the loss. in their mind ,they don't have to report any because "tey had no Income".The irs gets a report from the Brokerage house reporting only the sales figures.Therefor the IRS calculated the gain based on the sales amounts,hence creating a huge tax liability.

    Anna has to file a return ,reporting the transactions and owing nothing. And carrying the losses forward.

  3. Idaho_Jim Says:
    August 12th, 2009 at 08:10 am

    Claim those stocks losses and take the $3,000 loss each year. Personally, the IRS should change the $3,000 annual limit to $10,000 or more. I'll probably die before I use up my stock lossses since my stock transactions are now all in a Roth IRA.

Google Custom Search