What Form 8949 Is For

Form 8949 is the IRS form you use to report sales and exchanges of capital assets—primarily stocks, bonds, mutual funds, real estate (in some cases), and other investment property. Think of it as the detailed transaction log that sits between your brokerage statements and your final tax calculation on Schedule D.

The form serves a critical reconciliation function: it allows you and the IRS to match up the information reported by your broker or real estate agent (on Forms 1099-B or 1099-S) with what you're claiming on your tax return. If you sold any investments during 2018, you almost certainly need Form 8949, unless you qualify for specific exceptions. IRS.gov

Form 8949 feeds into Schedule D (Capital Gains and Losses), which then flows to your main tax return (Form 1040 for individuals, or the appropriate form for corporations, partnerships, estates, and trusts). The form is divided into two main parts: Part I for short-term transactions (assets held one year or less) and Part II for long-term transactions (assets held more than one year). This distinction matters because short-term gains are taxed at your ordinary income tax rate, while long-term gains receive preferential tax treatment with maximum rates of 0%, 15%, or 20% for 2018, depending on your income level. IRS.gov

When You’d Use Form 8949

Regular Filing

Form 8949 is due with your regular tax return. For individuals filing Form 1040, this typically means the April 15 deadline (or October 15 if you filed for an extension). The form must be attached to Schedule D before you complete the relevant lines on that schedule. IRS.gov

Late Filing

If you missed the deadline and need to file late, Form 8949 should be included with your late return. While there's no separate penalty specifically for failing to file Form 8949, omitting it or filing it incorrectly can result in an inaccurate tax calculation, leading to underpayment penalties, interest charges, and potential IRS correspondence requesting corrections.

Amended Returns

If you discover errors after filing—such as missing transactions, incorrect cost basis, or wrong holding periods—you'll need to file an amended return using Form 1040-X (Amended U.S. Individual Income Tax Return). You must include a corrected Form 8949 and Schedule D with your Form 1040-X. The IRS recommends waiting until your original return has been fully processed before filing an amendment, and you generally have three years from the original filing date to claim a refund. IRS.gov

Key Rules or Details for 2018

Transaction Reporting

Each sale or exchange must be reported on a separate row of Form 8949, unless you qualify for one of two exceptions. Exception 1 allows certain taxpayers to skip Form 8949 entirely and report summary information directly on Schedule D—but only if all their transactions show basis reported to the IRS on Form 1099-B, have no adjustments needed, and aren't marked as "Ordinary." Exception 2 permits attaching a separate statement with transaction details in a similar format to Form 8949. IRS.gov

Box Selection

At the top of each Part I and Part II, you must check one of three boxes (A, B, or C for short-term; D, E, or F for long-term) that describes your transactions:

• Box A/D: Transactions reported on Form 1099-B with basis reported to the IRS
• Box B/E: Transactions reported on Form 1099-B with basis NOT reported to the IRS (or no basis shown)
• Box C/F: Transactions NOT reported on Form 1099-B

Basis Reporting

Your "basis" is typically what you paid for the asset, including commissions and fees. For 2018, brokers were required to report basis to the IRS for most stocks acquired after 2010 and certain other securities. You must always enter the proceeds and basis exactly as shown on your Form 1099-B (if you received one), making any necessary corrections in the adjustment columns. IRS.gov

Inherited Property

For property inherited in 2018, special rules apply. If the estate was large enough to require filing a federal estate tax return (Form 706), you should have received Schedule A to Form 8971 showing the estate tax value. You must report a basis consistent with that value, and reporting a higher basis can trigger a 20% penalty on any resulting tax underpayment.

Qualified Opportunity Funds

New for 2018, taxpayers could elect to defer capital gains by investing in Qualified Opportunity Funds (QO Funds) within 180 days of the sale. This requires specific reporting on Form 8949 and cannot use the summary reporting exceptions. IRS.gov

Step-by-Step (High Level)

Step 1: Gather all Forms 1099-B from brokers and Forms 1099-S from real estate closings. Also collect records of any transactions not reported on these forms.

Step 2: Separate your transactions into short-term (held one year or less) and long-term (held more than one year). Determine the correct box (A-F) for each group of transactions.

Step 3: For each transaction, record: (a) description of property, (b) date acquired, (c) date sold, (d) proceeds (sales price), (e) cost basis, (f) adjustment code (if applicable), (g) adjustment amount, and (h) gain or loss.

Step 4: Always enter proceeds and basis exactly as shown on Form 1099-B. If corrections are needed—such as for commissions not included, wash sale adjustments, or inheritance basis—use column (f) to enter the appropriate code and column (g) for the adjustment amount.

Step 5: Total each page of Form 8949 and carry the subtotals to the appropriate lines on Schedule D (lines 1b, 2, 3, 8b, 9, or 10).

Step 6: Complete Schedule D to calculate your overall capital gain or loss, which flows to your main tax return.

Common Mistakes and How to Avoid Them

Mixing Short-Term and Long-Term

Don't report a one-year-or-less transaction on Part II or a long-term transaction on Part I. Check your purchase and sale dates carefully.

Wrong Box Checked

Each page of Form 8949 should have only one box checked, and it must match the type of transactions listed. If you have multiple types, use separate pages.

Not Reporting Required Adjustments

If your Form 1099-B shows a cost basis but you need to adjust it (for example, adding non-deductible commissions or correcting for a wash sale), you must enter an adjustment code in column (f) and the adjustment in column (g). Never just change the amounts without documentation.

Omitting Transactions

Every capital asset sale must be reported, even if you didn't receive a 1099-B. This includes gifts of stock that were later sold, private company shares, and cryptocurrency (which the IRS treats as property).

Using Exception 1 When Ineligible

Don't skip Form 8949 if any of your transactions require adjustments or if your 1099-B shows the "Ordinary" box is checked.

Inherited Property Basis Inflation

For estates subject to estate tax, using a basis higher than shown on Schedule A (Form 8971) can result in a 20% penalty. Always verify the reported estate tax value before filing.

What Happens After You File

After you submit your return with Form 8949, the IRS will match your reported transactions against the Forms 1099-B and 1099-S that brokers and settlement agents filed. If there are discrepancies—such as missing transactions, incorrect amounts, or mismatched Social Security numbers—you may receive a CP2000 notice (Proposed Changes to Your Tax Return) several months to a year later.

This notice isn't a bill but rather a proposal. You have the right to respond with documentation showing why your figures are correct. Common reasons for CP2000 notices include legitimate basis adjustments that the IRS system didn't recognize, wash sales, or transactions reported in a different tax year than the broker reported.

If your return shows a capital loss, you can use up to $3,000 per year to offset ordinary income, with any excess carrying forward to future years. The IRS will process these carryforwards automatically if you report them correctly on Schedule D. IRS.gov

FAQs

Q1: Do I need Form 8949 if I only have mutual fund sales reported on Form 1099-B?

Yes, unless you qualify for Exception 1. Mutual fund sales are capital asset transactions and must be reported either on Form 8949 or directly on Schedule D if you meet all the exception criteria.

Q2: What if my broker didn't report my cost basis to the IRS?

You still report the transaction on Form 8949, checking Box B (short-term) or Box E (long-term). Enter the proceeds shown on your 1099-B and calculate your own cost basis using your purchase records.

Q3: Can I use average cost basis for stocks in 2018?

Yes, but only for identical shares in mutual funds or dividend reinvestment plans where shares are held with a custodian. Once you elect average cost basis for a fund, you must continue using it. Other stocks require specific identification. IRS.gov

Q4: How do I report a wash sale adjustment?

If your Form 1099-B shows a wash sale disallowed loss in box 1g, enter "W" in column (f) of Form 8949 and the disallowed amount (as a positive number) in column (g). This reduces your deductible loss. The disallowed amount is added to the basis of the replacement shares.

Q5: What's the penalty for not filing Form 8949?

There's no separate penalty for the form itself, but failing to report capital gains can result in accuracy-related penalties (20% of the underpayment), underpayment interest, and failure-to-pay penalties (0.5% per month). Deliberate omissions can trigger fraud penalties of 75%.

Q6: Can I e-file Form 8949 with many transactions?

Yes. Most tax software and the IRS e-file system can handle large numbers of transactions. If using Exception 2 to attach a statement, you may need to submit it as a PDF attachment depending on your filing method. IRS.gov

Q7: What if I sold cryptocurrency in 2018?

The IRS treats cryptocurrency as property, not currency. Every sale or exchange must be reported on Form 8949, including crypto-to-crypto trades. Use "VARIOUS" for date acquired if you received the crypto through multiple transactions, but separate short-term and long-term holdings.

Sources

All information derived from official IRS publications including the 2018 Form 8949 Instructions, IRS Form 8949 Information Page, 2018 Form 1041-ES, IRS Amended Return Guidance, and IRS Topic 409.