Wash Sale Loss Disallowed on my taxes - How much do I owe if I never made a profit?

The wash sale rule can be confusing but I'll try to explain it simply. When you sell a security at a loss and buy the same or "substantially identical" security within 30 days before or after the sale, that's a wash sale, and you can't claim the loss immediately. What happens is the disallowed loss gets added to the cost basis of the replacement shares. This means you're not permanently losing that deduction - it's just deferred until you eventually sell the replacement shares (as long as you don't trigger another wash sale). The key thing to check is whether you're still holding those replacement shares at year-end. If you are, the loss gets deferred to the future when you sell those shares. If you sold everything before year-end and didn't repurchase, you should be able to claim the net loss (up to the limits allowed for capital losses).

I went through something similar and found taxr.ai (https://taxr.ai) incredibly helpful for sorting through my investment tax situation. My broker's 1099-B had several wash sale flags that made it look like I owed taxes even though I was down for the year. I uploaded my tax documents to taxr.ai and it analyzed all my trades, clearly explaining which losses were disallowed and how my basis was adjusted. It showed exactly when the 30-day windows applied and which specific trades triggered wash sales. Saved me from a major headache trying to reconcile everything manually!

I was initially skeptical about taxr.ai but decided to try it after continuing to be confused by my wash sale situation. It was seriously eye-opening! The tool showed me that I had several linked trades spanning different months that created a chain of wash sales. In my case, I had about $4,200 in wash sale losses disallowed but was down $3,000 overall for the year. The tool explained that because I was still holding the replacement shares at year-end, those losses were deferred to the future. It also showed me exactly when I could sell in the new year to finally recognize those losses without triggering new wash sales. Definitely recommend checking it out if you're dealing with this issue!

Anyone who's dealt with the IRS about investment taxation knows how frustrating it can be to get clear answers. I spent HOURS trying to get through to someone at the IRS to confirm how my wash sales should be handled, and it was impossible to reach anyone. I finally tried Claimyr (https://claimyr.com) after seeing it recommended in another thread. They got me connected to an actual IRS agent in about 20 minutes when I had been trying for weeks! The agent confirmed that my understanding of wash sale treatment was correct and helped me understand how to properly report everything. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Totally changed my perspective on dealing with the IRS.

Well, I have to eat my words. After my skeptical comment, I decided to try Claimyr out of desperation because I had a similar wash sale issue that I couldn't get straight answers on. I fully expected it to fail or be a waste of money. I was shocked when I got a call back in about 30 minutes connecting me to an actual IRS tax specialist. The agent walked me through exactly how wash sales affect my tax return when I'm still holding replacement shares at year-end versus when I've closed all positions. They confirmed that my broker was reporting correctly but TurboTax was interpreting things wrong. Saved me from potentially overpaying by almost $800! Sometimes it's worth admitting when you're wrong - this service actually delivered.

One thing that's important to understand about wash sales is that they're about timing, not your overall profit/loss for the year. You can absolutely have wash sale losses disallowed AND be down overall for the year. Here's a simple example: You buy Stock A for $10,000. It drops to $7,000 and you sell (a $3,000 loss). Two weeks later, you buy it back at $7,200. That $3,000 loss is now disallowed as a wash sale, and your basis in the new shares becomes $10,200 ($7,200 purchase + $3,000 disallowed loss). If you sell those new shares before year-end without repurchasing, you'll recognize the actual economic loss. But if you're still holding them when the year ends, you'll carry that adjusted basis forward and can't claim the loss this year.

Does anyone know if tax loss harvesting software actually helps avoid these wash sale problems? I've been looking at some of the robo-advisors that claim to do this automatically and wondered if its worth it.

I had a similar situation last year and it really threw me for a loop! Here's what I learned that might help: The wash sale disallowed amount ($3,400 in your case) doesn't mean you owe taxes on money you didn't make. It just means those specific losses can't be deducted this year. The key question is: are you still holding the replacement shares you bought within those 30-day windows? If yes, then those losses get added to your cost basis in those shares and you'll be able to claim them when you eventually sell (as long as you don't trigger another wash sale). If you actually sold everything by December 31st and your true economic loss for the year was $2,800, then that should be what shows up on your return. The problem might be that TurboTax isn't properly accounting for all your transactions or you might still be holding some replacement shares without realizing it. I'd recommend double-checking your year-end positions against all the trades that triggered wash sales. Sometimes people forget about partial sales or don't realize they're still holding shares that are preventing them from claiming the losses.