IRS Form 8949 is a tax form used primarily to report sales and trade of capital goods. Form 8949 is filed alongside Schedule D of the income tax form.
What is IRS Form 8949?
Form 8949 is used to report the following to the IRS:
Disposition of interest in a QOF
Election to defer capital gains invested in a Qualified Opportunity Fund (QOF)
Gains from involuntary conversions (other than accidents or theft) of fixed assets that are not used in your business.
Non-commercial bad debts
The sale or exchange of any fixed asset that is not declared in another schedule or form.
Worthless securities
A QOF is an investment vehicle that registers a federal partnership or corporate income tax return and is organized to invest in a Qualified Opportunity Zone (QOZ) property. QOZ is a community in economic difficulty in which new investments can benefit from preferential tax treatment.
Corporations, partnerships, properties, and trusts would use Form 8949 for many of the same reasons.
The IRS states that you must complete all copies of Form 8949 required to include all transactions if you are filing a joint return with your spouse. Transactions can be entered on separate forms depending on who made the transaction, or transactions can be mixed. You will enter the total of all of your 8949 forms and your spouse in Schedule D.
Who Uses IRS Form 8949?
Anyone who has received one or more Form 1099-B, Income from broker and barter exchange; Form 1099-S, Income from Real Estate Transactions; or IRS-authorized substitutes for these forms must complete Form 8949. These 1099 or substitutes will also be sent to the IRS.
You should carefully review the 1099 forms you collected from your broker. If the cost or basis for all transactions has been reported to the IRS and no adjustment is necessary, you may not need to complete Form 8949.
Complete information on the two exceptions that allow you to skip Form 8949 can be found on pages three and four of the IRS instructions for Form 8949.
Form 1099 should provide information about the option of checking boxes A, B, or C for short-term transactions (on the first page) or boxes D, E, or F for long-term transactions (on the second page), all for a specific transaction or set of transactions. However, you will need to determine from your records whether the transaction was short-term or long-term if box 2 of Form 1099 is empty and code X is in the "Applicable checkbox on Form 8949."
Short-term transactions generally involve assets held for one year or less, while long-term transactions generally involve assets held for more than a year. There are exceptions to this general rule. It is still considered a long-term transaction if you sell a property that you have inherited or given away, even if you have owned it for a year or less.
Exclude the date you entered the transaction, but include the date you exited the transaction when setting the retention period.
Boxes A and D are for transactions reported on Form 1099, indicating that the basis has been reported to the I.R.S. Boxes B and E are for transactions reported on Form 1099, indicating that the base was not reported to the IRS. Boxes C and F refer to transactions that were not reported to you on Form 1099.
How to complete and read Form 8949
Checkboxes A, B, or C in Part I, depending on the applicable reporting option. Enter information on all short-term transactions (sales and trades) of capital goods, including stocks, bonds, and real estate, that fall under this reporting category.
If you have other transactions to list than what the page can contain, you will need to complete another Form 8949 with the same checkbox.
The description of each property in column (a) of Form 8949 should be based on the description provided on the appropriate Form 1099 if you received one.
Column (d) is for proceeds, (e) is the cost or some other basis, (g) is the adjustment value, and (h) is for gains or losses. The profit or loss of each transaction is calculated by subtracting cost or other revenue bases, then adding or subtracting adjustments, as applicable.
Some examples of adjustments that you may need to make include increasing the basis of a property you sold with the value of any improvements you made and adjusting for any stock splits that occurred before the company's sale of shares. Publication 551, Basis of Asset, provides detailed information on the various increases and decreases in the basis.
In the second row, enter the totals of the numbers in columns (d), (e), (g), and (h). Enter the same values in Schedule D. You will enter values in line 1b of Schedule D if you checked box A. You would enter values in the second line if you checked box B and in the third row if you have checked box C.
Follow the same steps as in Part II for all long-term transactions that fall into one reporting category. Checkboxes D, E or F and enter information for all transactions. Add the same columns and enter the totals in row two, as in Schedule D. Enter the values in row 8b of Schedule D if you checked box D. Enter the values in row nine if you checked box E. Enter the values in line 10 if you checked box F.
In addition to the total profit or loss of transactions reported on Form 8949, you may need to use Schedule D to report:
• Certain transactions that do not need to be reported on Form 8949
A gain on Form 2439, Notice to Shareholders of Undistributed Long-Term Capital Gains, Form 6252, Instalment sale income, or Form 4797 (Part I), Sale of Commercial Property
A gain or loss on Form 4684, Injury and Theft, Form 6781, Gain and Loss Agreements Section 1256 and Cross Sections, or Form 8824, Like-kind Exchanges
Capital gains distributions that are not directly reported on line 6 of Form 1040 or 1040-SR or related capital gains distributions that are not directly reported on line 14 of Form 1040-NR, Declaration of income. The income of non-residents in the United States
Gain or loss from a partnership, company, property, or fund
Transfer of capital losses from one financial year to another
Can Form 8949 be completed electronically?
You must enter each transaction on separate lines in the electronic form if you want to submit via electronic means, or you can include Form 8949 as a PDF file attached to the return. You can also submit hard copies of Form 8949 and Form 8453.
Summary
Anyone who has gotten one or more Forms 1099-B, 1099-S, or IRS-authorized replacements must complete Form 8949.
Form 8949 is completed with Schedule D of the Federal Personal Income Tax Form.
The main purpose of IRS Form 8949 is to report sales and trade in capital goods.
You may not need to complete Form 8949 if the basis of all transactions has been reported to the IRS, and you do not need to make changes to these figures.
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