What Is IRS Form 8949?
Form 8949: Sales and Other Dispositions of Capital Assets is an Internal Revenue Service (IRS) form used to report capital gains and losses from investments. The form is used by individual taxpayers as well as partnerships, corporations, trusts, and estates.
Taxpayers are required to report short- and long-term capital gains and losses from sales of investments. The information recorded on Form 8949 reconciles the amounts reported to taxpayers and the IRS on Form 1099-B, which brokerages send to their account holders annually.
Key Takeaways
- IRS Form 8949 is used to report capital gains and losses from investments for tax filing.
- The form includes Part I and Part II to separate short-term capital gains and losses from long-term capital gains and losses, as they are subject to different tax rates.
- Users of Form 8949 also need to complete a Schedule D and file a Form 1099-B, which is provided by brokerages to individual taxpayers.
Who Can File Form 8949?
According to the IRS, individuals, partnerships, corporations, trusts, and estates can file Form 8949 in order to report the following:
- The sale or exchange of a capital asset not reported on another form or schedule
- Gains from involuntary conversions (other than from casualty or theft) of capital assets not used in your trade or business
- Non-business bad debts
- The worthlessness of a security
- The election to defer capital gain invested in a Qualified Opportunity Fund
- The disposition of interests in Qualified Opportunity Funds
Anyone filing a joint return must complete as many pages of the form as necessary to report their transactions. The totals from all completed pages of Form 8949 are transferred to Schedule D.
Along with the list above, corporations can use Form 8949 to report the sale of stock of a specified 10%-owned foreign corporation, adjusted for the dividends-received deduction under section 245A, but only if the sale would otherwise generate a loss.
Taxpayers with an eligible gain can invest it in a Qualified Opportunity Fund and elect to defer part or all of that gain.
How to File Form 8949
A capital gain or loss is generated when a capital asset is sold and reported to the IRS for tax purposes. Schedule D: Capital Gains and Losses of IRS Form 1040 is used to report most capital gain or loss transactions. Form 8949 must be completed in order to arrive at the net gain or loss that is entered on Schedule D.
Along with the filer's name and taxpayer identification number, Form 8949 has two parts that need to be completed. Part I deals with short-term assets held one year or less. Part II is used for long-term transactions, those assets held for more than one year. Each asset sold must be identified along with its purchase and sale date and its purchase and sale price.
The transactions reported on Form 8949 can be found on Form 1099-B: Proceeds from Broker and Barter Exchange Transactions, which is provided by brokerages once a year to their account holders and to the IRS. Form 1099-B reports the cost basis of the investor’s buy and sell transactions.
In some cases, Form 1099-B will not report the cost basis of an asset. If this is the case, the taxpayer must determine the base amount to calculate the gain or loss from a capital asset using a separate Form 8949. A capital asset transaction for which no Form 1099-B is issued must be listed on another Form 8949.
Form 8949 can also be used to correct any inaccuracies in the data reported on Form 1099-B. If the capital losses or gains for the year are reported for all assets on 1099-B with the correct basis, then Form 8949 is not necessary.
Keep in mind, though, that Schedule D is still required and must still be filed.
Where to Find Form 8949
All the pages of Form 8949: Sales and Other Dispositions of Capital Assets are available on the IRS website.
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Can Schedule D Be Completed Without Form 8949?
No, a taxpayer with capital gains or losses to report must file both Form 8949 and Schedule D. Form 8949 displays a list of every transaction, including its cost basis, its sale date and price, and the total gain or loss. The total short-term and long-term gains or losses are then used on Schedule D to determine the total amount of capital gains taxes owed.
What Information Is Required on Form 8949?
Information required for each asset reported on Form 8949 includes the description of the stock or other asset, the purchase price, purchase date, selling price, and selling date.
Is Form 8949 Required for Reporting Cryptocurrency Transactions?
Form 8949 may be required when you realize a gain on cryptocurrency by buying and then selling crypto for profit in a taxable account or exchanging crypto for goods or services that realize a gain in value.
The Bottom Line
Form 8949: Sales and Other Dispositions of Capital Assets is an IRS form used by both individuals and businesses to report capital gains and losses from investments. Form 8949 and Schedule D are required as part of your tax return whenever a capital asset such as stock is sold during the year.
Each listing of an asset on Form 8949 includes the description of the property, its purchase price, purchase date, selling price, and selling date.
For stock investors, most of the information needed to complete Form 8949 is included on Form 1099-B that brokerages send to their account holders annually.
