If you sold or exchanged a capital asset during the tax year, you may need to file Form 8949, Sales and Other Dispositions of Capital Assets. This IRS form is used to report the details of capital asset transactions, including the dates acquired and sold, proceeds, cost basis, and any adjustments that affect your gain or loss. The form helps reconcile any amounts from stocks, mutual funds, cryptocurrency, real estate, or other investments reported to the IRS and you on Forms 1099-B or 1099-S. Form 8949 works alongside Schedule D (Form 1040) to help calculate your total capital gains and losses for the year.
What is Form 8949 used for?
Form 8949 is a supplementary form for Schedule D. These forms work together to help you calculate your capital gains and losses for the year. Capital gains and losses refer to the earnings and losses from selling assets.
According to the IRS, Form 8949 may be used to report:
- Sales or exchanges of capital assets not reported on another form
- Transactions reported on Form 1099-B or Form 1099-S that require additional reporting or adjustments
- Gains from involuntary conversions of capital assets not used in a trade or business
- Nonbusiness bad debts that are no longer deemed recoverable and must be written off
- Securities that have a market value of $0
When you sell a capital asset, you may realize a capital gain or capital loss based on the difference between your selling price and your cost basis. These gains and losses flow from Form 8949 to Schedule D, which summarizes your overall taxable investment activity for the year.
Who needs to file Form 8949?
Generally, taxpayers who sell, exchange, or otherwise dispose of capital assets during the year may need to file Form 8949. Common examples include:
- Stocks and bonds
- Exchange-traded funds (ETFs)
- Mutual funds
- Cryptocurrency and other digital assets
- Certain real estate transactions
- Collectibles
- Other investment property held for personal investment purposes
You may also need Form 8949 if you received a Form 1099-B or Form 1099-S and must report the details of those transactions on your tax return. Digital asset investors should pay particular attention to reporting requirements, as the IRS has added specific reporting categories for digital asset transactions on Form 8949.
How to fill out Form 8949
Form 8949 has two parts to complete. Part I reports short-term transactions held for less than a year. Part II reports long-term transactions, and it follows the same instructions as Part I.
To calculate the value of each type of transaction, you’ll need to provide the following information:
- Description of property
- Dates of acquisition and sale
- Proceeds (sales price)
- Cost or other basis
- Adjustments (if any) to gain or loss and the adjustment code
- Gain or loss
After completing Form 8949, you must use the totals (from both your short-term and long-term transactions) to complete Schedule D. Additionally, you must attach both Form 8949 and Form 1099-B to Schedule D. You’ll typically receive Form 1099-B from the broker or barter you dealt with.
Learn how to generate your personalized Form 8949 using TaxSlayer here.
Why is Form 1099-B relevant to Form 8949?
Form 1099-B is one of the most important documents used to complete Form 8949. Brokerage firms issue Form 1099-B to report investment sales and may also provide information about proceeds, cost basis, holding period, and certain adjustments. The IRS receives a copy as well.
Form 8949 helps reconcile the information reported on Form 1099-B with the amounts you report on your tax return. If the information reported by your broker is incomplete or requires adjustments, those corrections are generally reflected on Form 8949.
Where can I find the information needed to complete Form 8949?
Depending on the type of asset sold, the information needed may come from:
- Form 1099-B from your broker
- Form 1099-DA for certain digital asset transactions
- Form 1099-S for certain real estate sales
- Year-end brokerage statements
- Cryptocurrency exchange transaction histories
- Purchase confirmations and trade records
- Personal records showing acquisition costs and sale proceeds
Should I file Form 8949 with Schedule D?
Yes, you must file Form 8949 before completing Schedule D unless an exception applies to your situation. Form 8949 provides the details used to calculate the totals reported on Schedule D. However, certain exceptions do apply.
For example, if you received a Form 1099-B showing that cost basis was reported to the IRS and no adjustments are required, you may be able to report aggregate totals directly on Schedule D rather than listing those transactions individually on Form 8949.
Another example is an investor who sold several covered stock positions through a brokerage account, received a Form 1099-B with basis reported to the IRS, and does not need to adjust any transaction for wash sales, corrected basis information, or other reporting differences.
Can I file Schedule D without using Form 8949?
In most cases, you cannot file Schedule D without completing Form 8949 first. But, if you don’t need to make any adjustments to your assets, you may be able to aggregate those transactions and report them directly on either line 1a (for short-term transactions) or line 8a (for long-term transactions) of Schedule D.
The IRS also permits this exemption toward transactions for which:
- You received a Form 1099-B (or substitute statement) that shows the basis was reported to the IRS and doesn’t show any adjustments in box 1f or 1g;
- The Ordinary box in box 2 isn’t checked;
- You aren’t electing to defer income due to an investment in a Qualified Opportunity Fund and aren’t terminating deferral from an investment in a Qualified Opportunity Fund
Need help with Form 8949? TaxSlayer has all the forms required to quickly and accurately report the sale or exchange of your assets. Get started today!
