Form 1040 Schedule D-1: Continuation Sheet for Schedule D Capital Gains and Losses (2012)

What Form 1040 Schedule D-1 Is For

Schedule D-1, titled "Continuation Sheet for Schedule D," was historically used as an overflow worksheet when taxpayers had more capital gains and losses transactions than could fit on the main Schedule D (Capital Gains and Losses) form. However, Schedule D-1 was replaced by Form 8949 (Sales and Other Dispositions of Capital Assets) beginning with the 2011 tax year. This means that for 2012, Schedule D-1 was no longer in use as an official IRS form.

When Schedule D-1 was active in prior years (2010 and earlier), it served as a supplemental schedule where taxpayers listed individual stock sales, bond transactions, real estate sales, and other capital asset dispositions. Each transaction required its own line showing the property description, dates acquired and sold, sales price, cost basis, and resulting gain or loss. Once all transactions were recorded on Schedule D-1, the totals were transferred to the appropriate lines on Schedule D, which calculated the overall capital gains or losses and determined the tax owed.

For the 2012 tax year, Form 8949 performed this same function but with enhanced reporting requirements, including checkboxes to indicate whether transactions were reported to the IRS on Form 1099-B and adjustment codes to explain any differences between reported amounts and actual figures.

When You’d Use Form 1040 Schedule D-1

Late and Amended Returns

Since Schedule D-1 was not an official form for 2012, taxpayers filing original, late, or amended 2012 returns would not use Schedule D-1. Instead, they would use Form 8949 to list their capital asset transactions.

However, if a taxpayer was filing a very late or amended return for tax years 2010 or earlier, they might encounter or use Schedule D-1, depending on which forms were required for that specific tax year. For those earlier years, Schedule D-1 would be used when:

You had more capital asset sales or exchanges than could fit on Schedule D itself
You needed additional space to list stocks, bonds, mutual funds, real estate, or other capital assets sold during the year
You were amending a return from those years and needed to add or correct transaction details

For 2012 specifically, late filers or those filing amended returns (Form 1040X) would attach Form 8949 rather than Schedule D-1 to report their capital gains and losses, following the same procedures as timely filers.

Key Rules or Details for 2012

Since Schedule D-1 was not used in 2012, the following rules apply to Form 8949 and Schedule D reporting for that year:

Transaction Reporting

Every sale or exchange of a capital asset must be reported on Form 8949 unless specifically excepted. This includes stocks, bonds, mutual funds, real estate (other than your main home, in most cases), and other investment property. Capital assets are generally property held for personal use or investment.

Holding Period Classification

Transactions must be classified as either short-term (assets held one year or less) or long-term (assets held more than one year). Short-term transactions are reported in Part I of Form 8949, while long-term transactions appear in Part II.

Three Reporting Categories

Form 8949 divides transactions into three categories based on how they were reported to the IRS:

Box A/D (short-term/long-term): Transactions reported on Form 1099-B showing basis was reported to the IRS
Box B/E (short-term/long-term): Transactions reported on Form 1099-B but basis was NOT reported to the IRS
Box C/F (short-term/long-term): Transactions not reported to you on Form 1099-B

Adjustments and Codes

Taxpayers must use adjustment codes in column (f) to explain any differences between amounts reported on Forms 1099-B and the amounts they're reporting on their return. Common codes include "W" for wash sales, "L" for nondeductible losses, and "H" for home sale exclusions.

Summary Reporting

After completing all necessary Forms 8949, taxpayers transfer the totals to Schedule D, lines 1b, 2, 3, 8b, 9, and 10, depending on the category and holding period. Schedule D then calculates the net capital gain or loss.

Loss Limitations

Capital losses can offset capital gains plus up to $3,000 of ordinary income ($1,500 if married filing separately). Excess losses carry forward to future years.

Step-by-Step (High Level)

For taxpayers reporting capital gains and losses in 2012 (using Form 8949, not Schedule D-1):

Step 1: Gather Documentation

Collect all Forms 1099-B, 1099-S, and brokerage statements showing sales of stocks, bonds, mutual funds, real estate, and other capital assets during 2012. Also gather your own records showing when you acquired each asset and what you paid for it (your cost basis).

Step 2: Organize by Category

Sort your transactions into six categories: short-term with basis reported to IRS, short-term without basis reported, short-term not on 1099-B, long-term with basis reported, long-term without basis reported, and long-term not on 1099-B. The type of Form 1099-B you received (or didn't receive) determines which category applies.

Step 3: Complete Form 8949

Use a separate Form 8949 page for each category that applies to you. Check the appropriate box (A, B, C, D, E, or F) at the top of each page. List each transaction on its own line with the property description, dates acquired and sold, proceeds (sales price), cost basis, and any adjustments. Include adjustment codes in column (f) if needed and calculate the gain or loss for each transaction in column (h).

Step 4: Calculate Totals

Add up the totals for each Form 8949 page and record the proceeds, basis, adjustments, and gain/loss amounts at the bottom. If you have more transactions than fit on one page for a particular category, use additional pages with the same box checked.

Step 5: Transfer to Schedule D

Enter the summary totals from your Form 8949 pages onto the appropriate lines of Schedule D (lines 1b, 2, 3 for short-term; lines 8b, 9, 10 for long-term). Also report any other gains or losses that don't go through Form 8949, such as capital gain distributions from mutual funds.

Step 6: Complete Schedule D Calculations

Follow Schedule D's instructions to combine short-term and long-term transactions, apply capital loss limitations, and calculate your net capital gain or loss. This amount flows to Form 1040 and affects your total tax liability.

Common Mistakes and How to Avoid Them

Using the Wrong Form for the Tax Year

For 2012, the most fundamental error would be attempting to use Schedule D-1, which was obsolete. Always use Form 8949 for 2011 and later tax years. Check the IRS website or instructions to confirm which forms are current for the year you're filing.

Checking the Wrong Box on Form 8949

Many taxpayers check Box C (not reported on 1099-B) when they should check Box A or B (reported on 1099-B). Carefully match your transactions to the Forms 1099-B you received. The box you check tells the IRS how to reconcile your reported amounts with what brokers reported, preventing notices and audits.

Omitting Required Transactions

Some taxpayers think they don't need to report transactions if they had a loss or if the sale is shown on a 1099-B. However, you must report virtually all capital asset sales, even if you had no gain or even a loss. Omitting transactions causes IRS computer matching problems.

Incorrectly Reporting Wash Sales

When you sell stock at a loss and buy substantially identical stock within 30 days before or after the sale, you cannot deduct the loss currently. Many taxpayers either fail to identify wash sales or incorrectly calculate the disallowed loss. Use code "W" in column (f) and enter the disallowed loss as a positive adjustment in column (g).

Failing to Adjust for Non-Deductible Losses

Losses on personal-use property (like your car or furniture) and losses on sales to related parties are not deductible. These must still be reported on Form 8949, but you must adjust them out by entering "L" in column (f) and the loss amount as a positive number in column (g), resulting in zero net loss.

Mixing Holding Periods

Don't combine short-term and long-term transactions on the same Form 8949 page. They have different tax rates and must be reported separately in Parts I and II respectively. Calculate your holding period carefully—it begins the day after you acquire the asset and includes the day you sell it.

Inadequate Record-Keeping

Many taxpayers cannot document their cost basis, especially for older holdings or inherited property. Keep purchase confirmations, brokerage statements, and records of reinvested dividends. For inherited property, the basis is usually the fair market value on the date of death, not what the deceased person paid.

Not Claiming All Allowable Adjustments

Forgetting to add sales commissions and fees to your cost basis or subtract them from proceeds reduces your gain or increases your loss. Similarly, forgetting to claim an exclusion for the sale of your home (up to $250,000 or $500,000 if married) can result in overpaying tax.

What Happens After You File

Once you file your 2012 Form 1040 with Form 8949 and Schedule D attached, the IRS processes your return through computerized matching programs. The IRS receives copies of all Forms 1099-B that brokers and financial institutions issue to you, and their computers automatically check whether the sales proceeds you reported match what was reported to them.

If the IRS computers detect a discrepancy—for example, if you omitted a transaction or reported different amounts than shown on Forms 1099-B—you'll typically receive a CP2000 notice, usually 12 to 18 months after filing. This notice proposes additional tax based on the discrepancy and gives you an opportunity to respond with an explanation or documentation showing why your return is correct.

When your capital gains or losses flow through to your Form 1040, they affect your adjusted gross income and ultimately your tax liability. Net capital gains may be taxed at preferential rates (0%, 15%, or 20% for most taxpayers in 2012, depending on your income level), which is generally lower than ordinary income tax rates. However, certain capital gains—such as collectibles gains and unrecaptured Section 1250 gain from depreciated real estate—are taxed at higher rates.

If you have a net capital loss, up to $3,000 can reduce your ordinary income in 2012 ($1,500 if married filing separately). Any excess capital loss that cannot be used in 2012 carries forward indefinitely to future years. This carryover retains its character as short-term or long-term. You'll report the carryover on your 2013 Schedule D, and it continues forward until fully used.

The IRS generally has three years from your filing date to audit your return, though this period can be extended in certain circumstances. Keep all supporting documents for your capital gains and losses—including brokerage statements, purchase confirmations, sale confirmations, and Form 8949 worksheets—for at least three years after filing, or longer if you have capital loss carryovers.

If you discover an error after filing, you can file Form 1040X (Amended U.S. Individual Income Tax Return) to correct it. For 2012 returns, you generally have three years from the original filing date or two years from the date you paid the tax (whichever is later) to file an amended return claiming a refund. If you owe additional tax, file the amended return as soon as possible to minimize interest and penalties.

FAQs

What happened to Schedule D-1, and why can't I find it for 2012?

Schedule D-1 was discontinued after the 2010 tax year and replaced by Form 8949, which became mandatory starting with 2011 tax returns. The IRS made this change to improve reporting accuracy and help reconcile taxpayer-reported transactions with information reported by brokers and financial institutions on Form 1099-B. Form 8949 includes additional fields for adjustment codes and provides separate sections for transactions based on whether they were reported to the IRS. If you're filing a 2012 return, you must use Form 8949 instead of Schedule D-1.

If I have many transactions, do I need a separate Form 8949 for each one?

No, each Form 8949 page has space for multiple transactions—you can list many transactions on each page. However, you cannot mix different reporting categories on the same page. For example, transactions where basis was reported to the IRS (Box A for short-term or Box D for long-term) must be on separate pages from transactions where basis was not reported (Boxes B or E). If you have more transactions than fit on one page for a particular category, simply attach additional Form 8949 pages with the same box checked. Many taxpayers with hundreds of transactions from active trading may attach summary statements instead, following specific IRS guidelines.

Can I still deduct capital losses if I forgot to report them on my original 2012 return?

Yes, but you'll need to file an amended return using Form 1040X. You generally have three years from the original filing deadline (April 15, 2013, for most 2012 returns, so until April 15, 2016) to amend your return and claim capital losses. Attach a corrected or new Form 8949 and Schedule D showing the losses. If you miss this three-year deadline, you cannot claim the losses for 2012, but in some cases, you might be able to carry them back to prior years or forward to future years depending on specific circumstances and whether you filed on time.

How do I report a stock sale if my broker shows one cost basis on Form 1099-B but I believe it should be different?

Report the transaction on Form 8949 exactly as shown on your Form 1099-B in columns (d) and (e), then make an adjustment in column (g). Enter the appropriate adjustment code in column (f)—typically "B" for basis adjustment. In column (g), enter the difference between your correct basis and what's shown on the 1099-B (as a positive or negative number as appropriate). This approach helps the IRS reconcile your return with the broker's reporting while allowing you to claim your correct basis. Keep documentation supporting your basis adjustment in case the IRS questions it.

What if I inherited stock or received it as a gift—how do I determine the cost basis?

For inherited property, your basis is generally the fair market value of the asset on the date of the deceased person's death (or alternate valuation date if elected by the estate). This is often called a "step-up in basis." For gifts, your basis is generally the same as the donor's basis (called "carryover basis"), though special rules apply if you sell the property at a loss. If you inherited stock, request documentation from the executor or estate administrator showing the date-of-death value. For gifts, ask the donor for their original purchase information. Report these transactions on Form 8949 with Box C checked (not reported on 1099-B) if you didn't receive a 1099-B, or Box A/B/D/E if you did.

Do I need to report the sale of my primary residence on Form 8949 and Schedule D?

In many cases, yes, you must report it even if you qualify for the home sale exclusion (up to $250,000 or $500,000 of gain if married). You must report the sale if you received Form 1099-S or if you cannot exclude all of the gain. Report it on Form 8949 with Box C checked. Enter your proceeds in column (d) and your adjusted basis in column (e). If you qualify for the exclusion, enter "H" in column (f) and enter the amount of your exclusion as a negative number (in parentheses) in column (g). However, you don't need to report the sale if you didn't receive Form 1099-S and you can exclude all the gain under the home sale exclusion rules. See IRS Publication 523 for detailed guidance on home sales.

What happens if I have capital loss carryovers from previous years—where do they go on my 2012 return?

Capital loss carryovers from 2011 (or earlier years) are entered directly on Schedule D, not on Form 8949. Enter short-term capital loss carryovers on Schedule D, line 6, and long-term capital loss carryovers on line 14. You should have kept a worksheet from your prior year's return showing the amount and character of losses carrying forward. These carryover losses combine with your 2012 capital gains and losses to determine your net capital gain or loss for 2012. Any losses you cannot use in 2012 because of the $3,000 limitation will carry forward to 2013 and beyond.

Sources: All information derived from official IRS sources:

You have not enough Humanizer words left. Upgrade your Surfer plan.

‍

Checklist for Form 1040 Schedule D-1: Continuation Sheet for Schedule D Capital Gains and Losses (2012)