IRS Form 8949 (2017): Filing Instructions & Key Tax Tips

What IRS Form 8949 Is For

IRS Form 8949 (2017) reports the sale or exchange of capital assets such as stocks, bonds, mutual funds, real estate, and cryptocurrency. It allows the IRS to confirm your capital gains and losses by comparing data from Form 1099-B or 1099-S with your tax return. Transactions are categorized into short-term and long-term categories to apply the correct capital gains tax rate. Totals are reported on Schedule D (Form 1040) for final gain or loss reporting.

When You’d Use IRS Form 8949 

You must file IRS Form 8949 (2017) if you sold or exchanged capital assets during the 2017 tax year, even if you had a loss. This includes sales of stocks, bonds, cryptocurrency, or real estate. The form is required whenever you receive a Form 1099-B or Form 1099-S showing proceeds from these transactions.

You’ll also use Form 8949 if:

• You’re filing an amended return: For example, if you found an error in your original cost basis or forgot to report a sale, you will attach a corrected Form 8949 to Form 1040-X.
  
  
• You’re filing late: The original deadline for 2017 returns was April 17, 2018, but you can still file to correct or report your capital gains and losses accurately.

Some taxpayers may skip Form 8949 only if every Form 1099-B shows a reported cost basis with no adjustments required. Visit our IRS Form Help Center to learn more about required IRS forms for reporting investment sales and capital gains.

Key Rules and Details for 2017 

For the 2017 tax year, several essential rules guided how taxpayers reported capital gains and losses on IRS Form 8949 (2017). These details help ensure that your filing is accurate and compliant with IRS tax laws:

• Short-Term vs. Long-Term Gains: Assets held one year or less are short-term and taxed at regular income rates, while those held longer qualify for lower long-term capital gains tax rates.
  
  
• Cost Basis and Adjustments: Report the purchase price, adjusted cost basis, and proceeds for each transaction. Brokers must report the cost basis of most “covered securities” on Form 1099-B. Always verify that your reported figures match your broker’s data for tax purposes.
  
  
• Special Rules: Certain transactions follow unique rules, including wash sales, inherited property, and gifts. Under the wash sale rule, if you sell stock at a loss and buy a substantially identical one within 30 days, that disallowed loss must be added to your adjusted basis in the replacement stock.

Keeping accurate records and applying consistent cost basis methods will help ensure your tax return accurately reflects your capital gains and losses.

Step-by-Step Guide (High Level) 

1. Gather tax forms and brokerage records showing proceeds, shares purchased, reinvested dividends, interest income, other income, and other investments so both you and the IRS can verify each capital gain or loss.
   
   
2. Confirm the holding period to separate short-term from long-term, then note the fair market value on sale and the original purchase price, including additional costs, other fees, and adjustments for stock splits or personal property rules.
   
   
3. Choose a cost basis approach; many filers use the average cost basis for mutual funds, but start by accurately calculating the cost basis to determine net gains or capital losses.
   
   
4. Apply special tax rules: inheritances use the basis at the original owner's death; donations to nonprofit organizations may create tax breaks; and wash-sale outcomes can offset capital gains only in later periods.
   
   
5. Evaluate whether your capital losses exceed gains; a net capital loss up to the annual limit reduces taxable income, with any remaining balance carried forward as capital loss carryover to subsequent years and future years; use the capital loss carryover worksheet.
   
   
6. Check your filing status—whether you are filing a joint return or married filing separately—because tax rates and obligations vary, which may lower your tax bill or create other financial interactions.
   
   
7. If uncertain, consult a tax professional to confirm method choices, cost basis methods, and whether selling at a lower price now affects later loss planning and married filing implications.

Common Mistakes and How to Avoid Them 

Many taxpayers make reporting errors on IRS Form 8949 (2017) that can lead to incorrect taxable income or IRS notices. Understanding these issues—and how to avoid them—helps ensure your capital gains and losses are accurate.

• Reporting all sales: Some filers skip reporting small or lost transactions. You must list every sale to correctly offset capital gains and apply any capital losses toward your tax bill. Compare your brokerage reports, Form 1099-B, and records before filing to ensure accuracy.
  
  
• Incorrect cost basis: Using the wrong adjusted cost basis or ignoring fees can distort your capital gain or loss. Recheck cost basis methods and confirm the numbers match your 1099-B.
  
  
• Ignoring wash sale adjustments: The wash sale rule disallows certain losses when you repurchase the same stock. Review the wash sale codes and ensure the adjustments are included on your form.
  
  
• Forgetting loss carryovers: If your capital losses exceed gains, use a capital loss carryover to reduce future years’ tax. Complete the capital loss carryover worksheet and keep records for use in subsequent years.

Visit our page on IRS bank levies to learn more about enforcement actions that may occur when capital gains are reported inaccurately.

What Happens After You File

After you file IRS Form 8949 (2017), the IRS reviews all your transactions and compares them with Form 1099-B data. Accuracy in calculating cost bases ensures correct tax obligations. Misreported short-term gains or sales of property held may trigger an IRS notice. 

Losses can be carried forward, and once reviewed, your filing determines whether a refund or balance is due. Learn more from our page on IRS payment plans to learn more about setting up a payment agreement if your capital gains increase the amount you owe.

FAQs

How do I report capital gains from selling investments on IRS Form 8949 (2017)?

You must list each sale of capital assets—such as stocks, bonds, or property—showing proceeds, purchase price, and any adjustments. The total capital gains and losses are then transferred to Schedule D to calculate your capital gains tax.

What if my adjusted cost basis on Form 1099-B is incorrect?

If the adjusted cost basis reported on your 1099-B is incorrect, you should enter the correct amount, then make the necessary correction in the adjustment column using the proper code. 

How does a capital loss carryover work for future returns?

If your capital losses exceed your gains, you can claim a capital loss carryover to reduce future taxable income. Use the worksheet provided in the IRS instructions to carry the balance forward to later years.

What is the difference between an average cost basis and other cost basis methods?

The average cost basis method averages the purchase prices of mutual fund shares, whereas other cost basis methods, such as FIFO or specific identification, track individual lot purchases. 

How do I start calculating the cost basis for assets I sold in 2017?

When calculating a cost basis, include the original purchase price, commissions, and fees. Adjust for stock splits, reinvested dividends, or returns of capital.