The IRS Form 8949 is a tax document commonly used to reconcile discrepancies in the amounts reported on your 1099-B and 1099-S forms and your tax return. Form 8949 is submitted alongside Schedule D.
How does IRS Form 8949 work?
According to the Internal Revenue Service (IRS), you will use Form 8949 to report the following:
- Sale or exchange of any capital asset that was not reported on another form or schedule
- Gains from involuntary conversions of capital assets not used in your business, except for casualties or theft
- Non-business bad debts
- Value of worthless securities
- Election to defer capital gains invested in a Qualified Opportunity Fund (QOF)
- Dispositions of interests in QOFs
Businesses, partnerships, estates, and trusts use Form 8949 for similar purposes.
Note: A QOF is an investment vehicle specifically organized to invest in qualified opportunity zone property (QOZ). A QOZ is a community that suffers from economic distress where you can receive special tax treatment if you invest in it.
Complete a sufficient number of Form 8949s to cover all transactions made by you and your spouse if you are married and filing a joint return. You can enter the transactions on separate forms according to who completed the transaction, or combine them into one form. In any case, you must enter the total from all your Form 8949s and your spouse’s Form 8949s on your Schedule D.
Example of using Form 8949
Suppose you bought and sold several investments during the year through one broker. The broker sends you a 1099-B form with data that does not match your records. You want to report your figures on your Form 1040, so you use Form 8949 to document the discrepancies between what is on the 1099-B you received and what you reported on your return.
Who uses IRS Form 8949?
Anyone who received one or more 1099-B or 1099-S forms, and the alternatives allowed by the IRS, must file Form 8949.
Carefully review the 1099 forms you received from your broker. You might not need to file Form 8949 if the cost or basis of all your transactions was reported to the IRS and if you did not need to make any adjustments.
Your 1099 forms should provide you information on whether you need to check box A, B, or C (Part I) for short-term transactions, or box D, E, or F (Part II) for long-term transactions, for all transactions or a group of transactions. However, you will need to determine from your own records whether the transaction was short-term or long-term if box 2 of the 1099 form is left blank, and if the code X is in the box “appropriate box on Form 8949.”
Note: Boxes A and D on Form 8949 are used for transactions reported on 1099 forms indicating that the basis was reported to the IRS. Boxes B and E are used for transactions reported on 1099 forms indicating that no basis was reported to the IRS. Boxes C and F are used for transactions not reported to you on a 1099 form.
Short-term transactions are generally those involving assets held for one year or less. Long-term transactions are generally those involving assets held for more than one year. However, there are exceptions to this general rule. A transaction is always considered long-term if you sold property that you inherited or received as a gift, even if you held it for one year or less. To calculate the holding period of the asset, count from the day after you received it until you sold or gave it away to someone.
Where
Can I obtain Form 8949?
The Internal Revenue Service (IRS) provides an interactive Form 8949 on its website. You can fill it out online and print it. The form should also be available from any tax preparation software you use.
How to fill out and read Form 8949?
Check box A, B, or C in Part I, depending on which option applies to you. Enter information about all short-term transactions in line 1 (sales and exchanges) of capital assets, including stocks, bonds, and real estate that fall under this reporting category.
Note: You will need to fill out another Form 8949 with the same specified box if you have more transactions to report than can fit on the page.
Your description of each property in column “A” on Form 8949 should be based on the description given in the relevant Form 1099-B or Form 1099-S (if you received one).
Column “D” is for proceeds, “E” is for cost or other basis, “C” is for the amount of adjustment, and “F” is for gain or loss. The gain or loss for each transaction is calculated by subtracting the cost or other basis from the proceeds, then adding or subtracting any adjustment if applicable.
Examples of adjustments you may need to make include increasing the basis of the property you sold by any improvements you made to it, and adjusting for any stock splits that occurred before selling the company’s shares. Publication 551 provides detailed information about various basis increases and decreases.
Enter the totals from columns (D), (E), (C), and (F) on line 2. Enter the same amounts on Schedule D. You will enter the amounts on line 1b of Schedule D if you checked box A. You will enter the amounts on line 2 if you checked box B. Enter the amounts on line 3 if you checked box C.
Follow the same steps in Part II for all long-term transactions that fall under one of the reporting categories. Check box D, E, or F, and enter the information for all transactions. Add the same columns and enter the totals on line 2, as well as on Schedule D. Enter the amounts on line 8b of Schedule D if you checked box D. Enter the amounts on line 9 if you checked box E. Enter the amounts on line 10 if you checked box F.
Using Schedule D
In addition to the overall gain or loss from the transactions reported on Forms 8949, you may also need to use Schedule D to report certain transactions that you do not need to report on Form 8949.
Can Form 8949 be filed online?
You must enter each transaction in separate rows on the electronic form if you wish to file Form 8949 online, or you can include Form 8949 as a PDF attachment to your return. You can also mail paper copies of Forms 8949 and 8453 for a return electronically filed with the IRS.
Where can I mail Form 8949?
You can mail Form 8949 with Schedule D and your Form 1040 or Form 1040-SR to the appropriate address. Where to send your return depends on where you live. You can find the correct address on the IRS website.
Frequently Asked Questions (FAQs)
Do I need Form 8949?
You must complete and file Form 8949 with your tax return if the information reported on Form 1099-B or Form 1099-S differs from the amount you are reporting on your tax return.
Do I need to…
Should I use Schedule D or Form 8949?
You will arrive at the subtotal amounts when completing Form 8949. These subtotals are carried over to Schedule D to calculate gain or loss, so you should use and file both forms with your tax return.
How do I fill out Schedule D and Form 8949?
The IRS provides specific instructions for both forms on its website, but the best way to ensure you are reporting and calculating this type of income correctly is to consult a tax professional.
How do I fill out Form 8949 for cryptocurrency?
You must report any sale or trade of your cryptocurrency, as well as any purchases you made with it.
Source: https://www.thebalancemoney.com/reporting-capital-gains-and-losses-form-8949-3192971
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