What Form 8949 Is For

Form 8949 is the IRS form you use to report sales and exchanges of capital assets—essentially any investment or property you sold during the 2017 tax year. Think of it as the detailed receipt book that shows the IRS exactly what you sold, what you paid for it, and whether you made or lost money on the transaction.

Capital assets include stocks, bonds, mutual funds, real estate (except your main home in most cases), cryptocurrencies, and other investments. The form serves as a reconciliation tool, allowing you and the IRS to match up the information reported on Forms 1099-B or 1099-S (the statements you receive from brokers and real estate agents) with what you're actually reporting on your tax return. Form 8949 feeds into Schedule D, where your overall capital gains and losses are calculated and your tax liability is determined.

The form is divided into two main parts: Part I for short-term transactions (assets held for one year or less) and Part II for long-term transactions (assets held for more than one year). This distinction matters because long-term capital gains typically receive more favorable tax treatment than short-term gains, which are taxed at ordinary income rates.

IRS Form 8949 Instructions

When You’d Use Form 8949 (Including Late and Amended Filing)

Original Filing: For the 2017 tax year, Form 8949 was due alongside your regular Form 1040 tax return, which for most people had a deadline of April 17, 2018 (extended from April 15 due to the Emancipation Day holiday in Washington, D.C.). You file Form 8949 whenever you sold or exchanged capital assets during 2017, even if you had a loss. If you received a Form 1099-B or 1099-S from a broker or real estate transaction, you almost certainly needed to file Form 8949.

Exceptions: There's an important exception—if all your Forms 1099-B showed that your cost basis was reported to the IRS, and you don't need to make any adjustments to the amounts reported, you might be able to skip Form 8949 entirely and report summary totals directly on Schedule D lines 1a or 8a. However, this exception only applies when very specific conditions are met.

Amended Returns: If you discover errors after filing your original 2017 return—perhaps you forgot to report a stock sale, entered the wrong cost basis, or miscalculated a gain or loss—you'll need to file an amended return using Form 1040-X. You would attach a corrected Form 8949 to this amended return. For the 2017 tax year, you generally have three years from the original filing deadline (so until April 2021 for most taxpayers) to file an amended return if you're claiming a refund.

Late Filing: If you never filed your 2017 return and owed capital gains taxes, there's no statute of limitations—you should file as soon as possible. Late filing penalties can be substantial (typically 5% of unpaid taxes per month, up to 25%), plus interest continues to accrue. Even if you're filing years late, you still need to include Form 8949 to report your capital asset transactions properly.

IRS.gov About Form 8949

Key Rules and Requirements for 2017

Holding Period Matters: Assets held for one year or less generate short-term capital gains or losses (reported in Part I), while assets held for more than one year generate long-term gains or losses (reported in Part II). For stocks and bonds, the holding period begins the day after you acquire the property and ends on the day you dispose of it. Inherited property is generally treated as long-term regardless of how long you actually held it.

Cost Basis Reporting: For 2017, brokers were required to report cost basis to the IRS for most stocks acquired after 2010 and for many other securities. This “covered security” information should appear in box 1e of your Form 1099-B. You must enter the basis exactly as shown on the 1099-B in column (e) of Form 8949. If adjustments are needed, you make them in columns (f) and (g).

Reconciliation Requirement: The purpose of Form 8949 is to reconcile what your broker reported to the IRS with what you're reporting on your return. Even if the amounts match perfectly, you generally need to list each transaction separately on Form 8949. Always report the gross proceeds from Form 1099-B in column (d), even if you later need to adjust them.

Multiple Forms: You'll need separate copies of Form 8949 for different transaction types. At the top of Part I and Part II, you check boxes (A, B, or C for short-term; D, E, or F for long-term) indicating whether your transactions were reported on Form 1099-B with basis reported to the IRS, without basis reported, or not reported on Form 1099-B at all. Don't mix different categories on the same form.

Special Transactions: Certain transactions require special handling, including wash sales (where you buy substantially identical securities within 30 days before or after a loss sale), inherited property, gifts, home sales, and partnership interests. Each has specific reporting requirements and adjustment codes.

IRS Schedule D Instructions 2017

Step-by-Step (High Level)

Step 1: Gather Your Documents

Collect all Forms 1099-B and 1099-S you received for 2017, along with your own records showing purchase dates, purchase prices, and any adjustments to basis (such as for stock splits, reinvested dividends, or commissions).

Step 2: Separate Short-Term from Long-Term

Sort your transactions based on holding period. Short-term (one year or less) goes in Part I; long-term (more than one year) goes in Part II.

Step 3: Categorize by Reporting Type

Within each part, further separate transactions into three categories: those reported on 1099-B with basis reported to IRS (boxes A or D), those reported on 1099-B with basis not reported to IRS (boxes B or E), and those not reported on 1099-B at all (boxes C or F).

Step 4: Complete the Form Line by Line

For each transaction, enter: (a) description of property (e.g., “100 shares XYZ stock”), (b) date acquired, (c) date sold, (d) proceeds from sale (from Form 1099-B box 1d), (e) cost or other basis (from Form 1099-B box 1e if available, or your records), (f) adjustment codes if needed, (g) adjustment amounts if needed, and (h) gain or loss (column d minus columns e and g).

Step 5: Total Each Part

Add up the amounts in columns (d), (e), (g), and (h) for each separate copy of Form 8949 you completed. These subtotals get transferred to the corresponding lines on Schedule D.

Step 6: Transfer to Schedule D

The totals from all your Form 8949 copies flow to Schedule D (Form 1040), where they're combined with other capital gain items to determine your overall capital gain or loss. Schedule D then calculates your capital gains tax using the appropriate tax rates—ordinary income rates for short-term gains, and preferential rates (0%, 15%, or 20% depending on your income) for long-term gains.

Step 7: Attach to Your Return

File Form 8949 along with Schedule D and your Form 1040. If you're filing electronically, your tax software will handle the attachment automatically.

Common Mistakes and How to Avoid Them

Mistake #1: Forgetting to Report All Transactions. Some taxpayers assume that if they lost money on a sale, they don't need to report it. Wrong—you must report all capital asset sales, even losses. In fact, losses can offset your gains and reduce your tax bill. How to avoid it: Cross-reference your brokerage statements with your Forms 1099-B to ensure you haven't missed any transactions.

Mistake #2: Mixing Transaction Types on One Form. You can't combine transactions that belong in different boxes (A, B, C, D, E, or F) on the same copy of Form 8949. How to avoid it: Use separate copies of Form 8949 for each box category, clearly checking only one box per form.

Mistake #3: Incorrect Cost Basis. This is the most common and costly error. Many taxpayers forget to adjust their basis for stock splits, reinvested dividends, return of capital distributions, or commissions paid when purchasing. Using an incorrect basis means calculating the wrong gain or loss. How to avoid it: Keep meticulous records of all purchases, including fees and commissions. If Form 1099-B shows basis, use that number in column (e) and make any necessary adjustments in columns (f) and (g) using the appropriate codes.

Mistake #4: Not Reporting Wash Sales Correctly. If you sell stock at a loss and buy substantially identical stock within 30 days before or after the sale, the loss is disallowed and must be added to the basis of the replacement stock. Many 2017 Forms 1099-B didn't catch all wash sales, especially across different accounts. How to avoid it: Review all your transactions for wash sales yourself. Enter “W” in column (f) and add back the disallowed loss in column (g).

Mistake #5: Failing to Reconcile with Form 1099-B. The IRS receives copies of your Forms 1099-B and uses sophisticated matching programs. If the proceeds you report don't match what the IRS received, you'll get a notice. How to avoid it: Always enter the exact gross proceeds shown in box 1d of Form 1099-B in column (d) of Form 8949, even if you need to adjust it later in column (g).

Mistake #6: Wrong Holding Period. Confusing short-term and long-term transactions can result in paying the wrong tax rate on your gains. How to avoid it: Count carefully from the day after acquisition through the sale date. More than 365 days means long-term.

Mistake #7: Missing Adjustment Codes. If you make an adjustment in column (g) without entering the appropriate code in column (f), the IRS won't understand why your numbers differ from Form 1099-B. How to avoid it: Consult the code table in the Form 8949 instructions and always enter the appropriate code when making adjustments.

What Happens After You File

Once you submit your 2017 tax return with Form 8949 and Schedule D, the IRS processes your return through automated systems that match the information you reported against the Forms 1099-B and 1099-S they received from brokers and other payers.

Matching Process: The IRS computers compare the proceeds you reported against their records. If everything matches and your return appears accurate, your return is processed normally. For the 2017 tax year, most refunds were issued within 21 days of electronic filing or 6-8 weeks for paper returns.

If There's a Discrepancy: If the IRS matching program finds differences between what you reported and what they received on Forms 1099-B, you'll receive a CP2000 notice, typically 12-18 months after filing. This isn't technically an audit, but rather a proposal to change your return. You'll have an opportunity to respond, provide documentation, and explain any legitimate adjustments you made in columns (f) and (g) of Form 8949.

Capital Loss Carryover: If your capital losses exceed your capital gains by more than $3,000 (or $1,500 if married filing separately), you can only deduct up to that limit in 2017. The excess carries forward to future years indefinitely. The IRS tracks this carryover, which you'll report on line 14 of your 2018 Schedule D. Make sure to keep records of your capital loss carryover amount.

Potential Audit: While Form 8949 itself doesn't trigger audits frequently, certain red flags can attract IRS attention: unusually large losses with no corresponding income, frequent trading activity that should qualify for trader status but was reported as investment income, or failure to report transactions that the IRS knows occurred. If selected for audit, you'll need to provide documentation supporting your reported cost basis, dates of acquisition, and any adjustments.

State Tax Returns: Don't forget that most states with income taxes also require reporting of capital gains and losses. Some states conform to federal treatment while others have their own rules. You'll typically need to provide copies of your federal Form 8949 and Schedule D when filing state returns.

FAQs

Q1: Do I need to file Form 8949 if I only received Form 1099-DIV showing capital gain distributions?

No. Ordinary capital gain distributions reported in box 2a of Form 1099-DIV are reported directly on Schedule D, line 13. You don't need Form 8949 for these. Form 8949 is only for actual sales and exchanges of capital assets you personally owned and disposed of.

Q2: What if my broker's cost basis information on Form 1099-B is wrong?

You must still enter the incorrect basis from Form 1099-B in column (e) of Form 8949. Then use code “B” in column (f) and enter the difference between the correct basis and the incorrect basis in column (g). For example, if Form 1099-B shows basis of $5,000 but your records prove it should be $6,000, enter $5,000 in column (e), “B” in column (f), and $1,000 in column (g). This way, the IRS can see both the amount reported by your broker and your correction.

Q3: Can I file Schedule D without Form 8949?

Only in limited circumstances. If all your transactions were reported on Forms 1099-B showing that basis was reported to the IRS (box 3 checked), and you don't need to make any adjustments, you can report summary totals directly on Schedule D lines 1a or 8a. This exception doesn't apply to most taxpayers, so when in doubt, complete Form 8949.

Q4: How do I report cryptocurrency transactions on Form 8949?

Cryptocurrency is treated as property for tax purposes. Report crypto sales on Form 8949 just like stock sales. In column (a), describe the crypto (e.g., “1.5 Bitcoin”). Since you probably didn't receive a Form 1099-B for 2017 crypto transactions, check box C (for short-term) or box F (for long-term). Enter your cost basis from your records in column (e) and the fair market value in U.S. dollars on the date of sale in column (d).

Q5: What if I inherited stock and don't know what my parent paid for it?

For inherited property, your basis is typically the fair market value on the date of death, not what the deceased person paid. You should have received documentation from the estate showing this value. Enter “INHERITED” in column (b) instead of the acquisition date. The holding period is automatically long-term, so report it in Part II. If you received a Schedule A to Form 8971 from the estate executor, you must use the basis shown on that form.

Q6: Do I need Form 8949 for the sale of my main home?

Only if you received Form 1099-S or if you can't exclude all your gain under the home sale exclusion rules. If you lived in and owned your home for at least 2 of the 5 years before the sale, you can exclude up to $250,000 of gain ($500,000 if married filing jointly). If your gain is less than the exclusion amount and you didn't receive Form 1099-S, you don't need to report the sale at all. If you do need to report it, use Part II of Form 8949 with box F checked.

Q7: What records should I keep after filing Form 8949?

Keep all supporting documentation for at least three years after filing your return (though the IRS recommends seven years): purchase confirmations, brokerage statements, Forms 1099-B, records of stock splits and dividends, inheritance documentation, and your completed Form 8949 itself. If you have a capital loss carryforward, keep records until you've used up the entire carryforward plus three additional years.