What the Form Is For

Form 8949 is the IRS form you use to report sales and exchanges of capital assets—essentially, when you sell investments like stocks, bonds, mutual funds, real estate (in some cases), or other property held for investment. Think of it as the detailed "receipt book" where you list every sale transaction before summarizing the results on Schedule D.

The form was introduced in 2011 to help both you and the IRS reconcile what your broker or real estate agent reported (on Forms 1099-B or 1099-S) with what you're claiming on your tax return. It's essentially a transparency tool that ensures everyone is working with the same numbers. Form 8949 captures critical details: what you sold, when you bought and sold it, how much you received, what you paid for it, and any adjustments needed to calculate your actual gain or loss.

You'll file Form 8949 alongside Schedule D, which summarizes your overall capital gains and losses and calculates your tax liability. Form 8949 handles the transaction-by-transaction details, while Schedule D provides the big picture.

When You’d Use Form 8949 (Including Late or Amended Returns)

You must file Form 8949 for the 2012 tax year if you sold or exchanged capital assets during 2012. This includes stocks, bonds, mutual funds, investment real estate, or other capital property. Even if you didn't receive a Form 1099-B or 1099-S from a broker or real estate agent, you still need to report these transactions.

Regular Filing

For the 2012 tax year, Form 8949 was due with your Form 1040 by April 15, 2013 (or October 15, 2013 if you filed for an extension).

Amended Returns

If you need to correct your 2012 return because you forgot to report a sale, made an error in your basis calculation, or discovered new information, you'd file Form 1040X (Amended U.S. Individual Income Tax Return) along with a corrected Form 8949 and Schedule D. Generally, you have three years from the original filing deadline to file an amended return claiming a refund.

Special Situations Requiring Form 8949

• You sold your main home and can't exclude all the gain, or you received a Form 1099-S
• You have nondeductible losses from wash sales (selling stock at a loss and buying it back within 30 days)
• You received capital gain distributions from mutual funds shown in box 2c or 1c of Forms 1099-DIV or 2439
• You need to report the exclusion of gain on qualified small business stock
• You had a nonbusiness bad debt

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Key Rules for 2012

The Three-Box System

Form 8949 divides transactions into categories using checkboxes. Part I covers short-term transactions (assets held one year or less), and Part II covers long-term transactions (held more than one year). Within each part, you check one of three boxes:

• Box A: Transactions reported to you with basis reported to the IRS (covered securities)
• Box B: Transactions reported to you without basis reported to the IRS, or basis was reported incorrectly
• Box C: Transactions not reported to you on Form 1099-B or 1099-S

For 2012, covered securities were generally limited to stock acquired after 2010 (or after 2011 for mutual funds). This was during the phased implementation of cost-basis reporting requirements.

Holding Period Matters

The distinction between short-term and long-term matters significantly. Short-term gains are taxed at ordinary income rates (potentially up to 35% in 2012), while long-term gains benefit from preferential rates (typically 0% or 15%, with some high earners facing 20%). Inherited property is generally reported as long-term regardless of how long you held it, with "INHERITED" entered in the date-acquired column.

Basis Calculation

Your basis is typically what you paid for the property plus purchase commissions and improvements, minus depreciation and distributions. If you received stock as a gift, inherited it, or acquired it in a tax-free exchange, special basis rules apply. Accurate recordkeeping is essential—if you lost your records, contact your broker for help.

Adjustments (Columns f and g)

These columns allow you to explain and correct discrepancies. Common adjustments include wash sale losses, home sale exclusions, selling expenses not reflected on Form 1099-B, or incorrect basis reporting. Each adjustment requires a specific code.

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Step-by-Step (High Level)

Step 1: Gather Your Documents

Collect all Forms 1099-B from brokers, Forms 1099-S from real estate transactions, and your own records showing purchase dates, amounts paid, and any adjustments to basis.

Step 2: Organize Transactions by Category

Sort your sales into short-term (Part I) or long-term (Part II), then within each category, group them by whether they fit Box A, B, or C. You'll need separate forms or sections for each category.

Step 3: Complete Form 8949 Line-by-Line

For each transaction, enter:

• Column (a): Description of property (e.g., "100 shares XYZ Corp.")
• Column (b): Date acquired (trade date for stocks; "INHERITED" if inherited)
• Column (c): Date sold or disposed
• Column (d): Proceeds/sales price (exactly as shown on Form 1099-B or 1099-S)
• Column (e): Cost or other basis (as shown on 1099-B if reported to IRS)
• Column (f): Adjustment code if needed (W for wash sale, H for home sale exclusion, etc.)
• Column (g): Adjustment amount (negative numbers in parentheses)
• Column (h): Gain or loss (calculated as: column d − column e + column g)

Step 4: Total Each Section

Add up the totals for columns (d), (e), (g), and (h) at the bottom of each Part I and Part II section.

Step 5: Transfer to Schedule D

Carry the totals from your Form 8949 sections to the corresponding lines on Schedule D (lines 1, 2, 3 for short-term; lines 8, 9, 10 for long-term).

Step 6: Complete Schedule D

Schedule D calculates your overall capital gain or loss, applies the $3,000 annual loss limitation, and determines your tax using preferential rates for long-term gains.

Common Mistakes and How to Avoid Them

Mistake #1: Not Reporting All Transactions

Many taxpayers forget to report sales when they don't receive a Form 1099-B. However, all capital asset sales must be reported, even if you didn't get a form. Keep your own records and report everything in Part I or II with Box C checked.

Mistake #2: Using Incorrect Basis

If Form 1099-B shows basis was reported to the IRS (box 6b checked), you must enter that basis in column (e) even if you believe it's wrong, then make an adjustment in columns (f) and (g). If you enter a different basis without explaining the adjustment, the IRS computers will generate a mismatch notice.

Mistake #3: Ignoring Wash Sales

Selling stock at a loss and repurchasing it within 30 days creates a nondeductible wash sale loss. The disallowed loss adds to the basis of the replacement shares. If your 1099-B doesn't catch this (especially for across-account purchases), you must make the adjustment yourself using code "W."

Mistake #4: Wrong Holding Period Classification

Double-check whether assets are short-term or long-term. A common error is counting the purchase date—your holding period begins the day after you acquired property and includes the day you disposed of it. One day can make a significant tax difference.

Mistake #5: Forgetting to Make Adjustments

If you had selling expenses (broker fees, commissions) not reflected on Form 1099-B, or if you qualify for exclusions (like the $250,000/$500,000 home sale exclusion), you must enter the appropriate code in column (f) and the adjustment in column (g). Overlooking these adjustments costs you money.

Mistake #6: Not Keeping Adequate Records

The IRS can audit returns for three years (longer in some cases). Maintain records showing purchase dates, amounts paid, reinvested dividends, stock splits, and selling expenses. Without documentation, the IRS may disallow your claimed basis and treat the entire proceeds as gain.

What Happens After You File

IRS Matching Program

The IRS receives copies of all Forms 1099-B and 1099-S issued to you. Their computers match these against your Form 8949 and Schedule D. If there's a discrepancy—such as unreported proceeds or mismatched basis—you'll receive a CP2000 notice (typically 12-18 months after filing) proposing additional tax, interest, and potential penalties.

Refund or Additional Tax

If you had net capital losses, you can deduct up to $3,000 per year ($1,500 if married filing separately) against ordinary income. Any excess loss carries forward to future years. If you had net capital gains, these are added to your taxable income, potentially increasing your tax liability or reducing your refund.

State Tax Implications

Most states require you to report the same capital gains and losses reported on your federal return. You'll generally need to file similar forms with your state tax return.

Amended Return Corrections

If you realize you made an error after filing, you can file Form 1040X with corrected Form 8949 and Schedule D. Be aware that claiming additional losses or deductions on an amended return may trigger increased IRS scrutiny.

Record Retention

Keep Form 8949, Schedule D, and all supporting documentation (brokerage statements, settlement statements, purchase confirmations) for at least three years after filing, or longer if you had significant transactions.

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FAQs

Q1: I received multiple 1099-B forms with dozens of trades. Do I really need to enter each one separately?

Generally, yes. However, Form 8949 provides two exceptions for 2012. Exception 1 allows you to report transactions on an attached statement containing all the same information as Form 8949 in a similar format, then enter combined totals on Form 8949 with "M" in column (f) and the broker's name followed by "see attached statement" in column (a). Exception 2 applies to certain business entities filing specific forms (1120S, 1065, 1065-B) or tax-exempt entities—they can enter summary totals with "Available upon request" in column (a).

Q2: What if the basis shown on my Form 1099-B is wrong?

It depends on whether box 6b is checked (meaning basis was reported to the IRS). If basis was NOT reported to the IRS, simply enter the correct basis in column (e) and -0- in column (g). If basis WAS reported to the IRS, you must enter the reported basis in column (e), then use code "B" in column (f) and make an adjustment in column (g) using the Worksheet for Basis Adjustments provided in the Form 8949 instructions.

Q3: I sold my main home in 2012. Do I need Form 8949?

You must report the sale on Form 8949 (Part II, Box C) if: (1) you cannot exclude all of your gain under the $250,000/$500,000 exclusion rules, or (2) you received Form 1099-S for the transaction. If you qualify for the full exclusion and didn't receive Form 1099-S, you don't need to report the sale. When reporting, use code "H" in column (f) and enter the excluded amount as a negative number in column (g).

Q4: What are "covered securities" and why does it matter?

Covered securities are those for which brokers must report cost basis to the IRS. For 2012, this generally included stock acquired after 2010 (after 2011 for mutual funds and dividend reinvestment plans). Box 6a and 6b on Form 1099-B indicate coverage status. It matters because if basis was reported to the IRS, you must use that reported basis in column (e) and make any corrections through adjustments, rather than simply entering a different basis.

Q5: I had wash sales. How do I report them?

Report the transaction on Form 8949 showing the actual proceeds and basis. Enter "W" in column (f) and the disallowed loss as a positive number in column (g). This adjustment brings your deductible loss to zero for that transaction. Remember that the disallowed loss isn't permanently lost—it's added to the basis of the replacement shares, which will reduce gain (or increase loss) when you eventually sell those shares.

Q6: Can I file Form 8949 electronically?

Yes, Form 8949 can be e-filed with your Form 1040. If you choose not to report each transaction separately on the electronic return, you can include Form 8949 as a PDF attachment or attach it to Form 8453 and mail it to the IRS. E-filing is generally faster and reduces errors compared to paper filing.

Q7: I sold stock that I bought at different times for different prices. How do I report this?

Report each purchase lot separately on different rows if you can identify which shares you sold. If you sold "VARIOUS" lots at once, you may report the sale on one row, entering "VARIOUS" in column (b). However, you still must split short-term and long-term portions between Part I and Part II. For mutual fund shares, you may be able to use the average basis method if you meet certain requirements.