ESPP/Form 3922 tax reporting when company has gone out of business

Thanks for the detailed explanation. I understand I need to use Schedule D and Form 8949, but I'm a bit confused about the dates. Do I use the original purchase dates from the 3922 forms as my acquisition dates, and then December 31, 2024 as the "sale" date since that's when they became worthless? And what if I'm not 100% sure they're completely worthless - the company just stopped operations but I never received formal notification about the stock value?

You would use the purchase dates shown on your Form 3922 as the acquisition dates - those should be the actual dates you acquired the shares through the ESPP. Then use December 31, 2024 as the disposition date, assuming that's the year the securities became worthless. For the worthlessness question, the standard is pretty high - you need to show the stock had no liquidation value and no reasonable expectation of becoming valuable in the future. If the company formally filed for bankruptcy with no assets for shareholders, that's usually sufficient. If you're uncertain, you might want to wait until you have more definitive information. Alternatively, you could claim a partial loss if you have some basis for estimating the reduced value. Keep checking if there's a bankruptcy trustee or administrator you can contact for official documentation.

Did taxr.ai actually help with determining if your securities were officially worthless? That's the part I'm struggling with most. My company just kind of disappeared without formal bankruptcy proceedings.

I'm skeptical about these tax tools for complex situations. Did it actually help with ESPP-specific rules? The discount element and lookback provisions make these more complicated than regular stock losses.

The tool helped me understand what documentation I needed to establish worthlessness for tax purposes. It explained that I needed evidence the company had closed with no reasonable chance of returning value to shareholders. In my case, I ended up locating a bankruptcy filing that confirmed this. For ESPP-specific rules, it absolutely addressed the discount elements. It analyzed my Form 3922 to identify my purchase price, fair market value, and the discount I received. Then it walked through how these factors affected my basis calculation for the capital loss. It even flagged potential ordinary income components that might have been previously reported on my W-2 when I originally participated in the ESPP so I wouldn't double-count certain amounts.

How does this service actually work? I've literally spent hours on hold with the IRS and eventually just give up. Do they somehow have a priority line or something?

That sounds like a scam. Why would anyone need to pay a service to call the IRS? And what happens when they connect you - do they listen to your confidential tax conversation? No thanks.

It's not a priority line. They use an automated system that waits on hold for you and monitors the call. When a human IRS agent picks up, their system detects this and immediately calls you, then connects both calls together. You're the only one talking to the IRS agent - the service just handled the hold time for you. The service doesn't listen to your call or have access to your tax information. Once you're connected with the IRS agent, it's just you and them talking directly. It's basically like having someone physically sit next to your phone on speaker and tap you when someone finally answers after those 2+ hour hold times.

What if there's absolutely no paper trail? My company just stopped operations and the founder ghosted everyone. No bankruptcy, no announcements, nothing. Just dead websites and returned mail. How do I prove when it became worthless?

When there's no official paper trail, you need to create your own documentation. Save emails showing bounced messages to company addresses, screenshots of dead websites with dates visible, news articles about the company closing, statements from your brokerage showing the last time the stock had value, etc. You can also write a detailed statement documenting your efforts to determine the company's status and why you concluded the securities were worthless in a particular tax year. Include dates of calls made, people you attempted to contact, and responses received. The more contemporaneous evidence you gather, the stronger your position will be if questioned. In some cases, former employees or executives might provide written statements confirming when operations ceased, which can be very helpful documentation.

That's a really good point! Do you know how to figure out who the transfer agent was if you can't remember? Is there some public database for that?

If you can't remember the transfer agent, check any old ESPP documents you might have - they usually list the transfer agent somewhere. You can also try searching SEC EDGAR filings for your former company - public companies have to disclose their transfer agent in various forms like 10-Ks or proxy statements. Another option is to call the major transfer agents directly (Computershare, EQ Shareowner Services, American Stock Transfer & Trust) and ask if they have records for your company. They can usually search by company name. If you still have any physical stock certificates or old account statements, the transfer agent name is often printed on them too.