If you’ve sold stocks within the past year, it’s important to know about Form 8949. This form is used to report the sale and exchange of capital assets, and it works in tandem with several other tax forms discussed in this article. Keep reading to learn how Form 8949 works.
What is IRS Form 8949?
According to the IRS, individuals, partnerships, corporations, trusts, and estates can use Form 8949 to report the following:
- The sale or exchange of a capital asset not reported on another form
- Gains from involuntary conversions of capital assets not used in your trade or field of business
- Nonbusiness-related bad debts – loans or balances owed that are no longer deemed recoverable and must be written off.
- Securities that have a market value of zero dollars.
How does Form 8949 work?
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.
Further reading: Taxes 101: Understanding Capital Gains and Losses
Who should file Form 8949?
If you’ve sold or exchanged assets on the stock market within the last year, you should complete Form 8949 to report your activity.
How to complete Form 8949
Form 8949 has two parts to complete. Part I reports short-term transactions – those held for less than a year. To calculate the value of your short-term transactions, 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
Once you’ve calculated a total for your short-term transactions, move on to Part II. Part II reports long-term transactions, and it follows the same instructions as Part I.
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.
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.
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!
