Form 8949: Sales and Other Dispositions of Capital Assets (2018)

What the Form Is For

Form 8949 is the IRS form you use to report the details of every stock, bond, mutual fund share, or other investment you sold during the year. Think of it as the detailed transaction log that backs up your Schedule D (Capital Gains and Losses). While Schedule D shows your overall capital gains and losses in summary form, Form 8949 is where you list each individual sale—the date you bought the investment, when you sold it, how much you paid, what you received, and whether you made or lost money.

The form became necessary in 2011 when the IRS wanted more detailed information about investment sales to match against reports from brokers and mutual fund companies. Before 2011, taxpayers used Schedule D-1 as a simple continuation sheet, but Form 8949 does much more—it allows you to report adjustments like wash sales (when you sell stock at a loss and buy it back too quickly), indicate whether your broker reported the transaction to the IRS, and make corrections to the cost basis your broker reported. The form separates your transactions into short-term (investments held one year or less) and long-term (held more than one year), which matters because long-term gains typically receive more favorable tax treatment.

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

You need Form 8949 whenever you sell investments like stocks, bonds, or mutual fund shares during the tax year. Most people complete it as part of their original tax return filed by the April deadline. However, you might need to file it later in several situations. If you realize after filing that you forgot to report some investment sales—perhaps you discovered a forgotten brokerage account or received a corrected Form 1099-B from your broker—you'll need to file an amended return using Form 1040-X and include a completed Form 8949 with the corrected information.

You might also need Form 8949 when reporting an installment sale from a previous year. If you sold property in an earlier year and agreed to receive payments over multiple years, each year you receive payment, you'll report the gain portion on Form 8949. Additionally, if you sold your main home and cannot exclude all of the gain from your income, you'll report the taxable portion on Form 8949. For those making sophisticated elections—like deferring eligible gains by investing in a Qualified Opportunity Fund—Form 8949 is where you report both the original gain and the deferral election. The form is also necessary when you have capital losses to carry forward; even though you couldn't use all your losses in one year, you must report them properly to preserve your carryover to future years.

Key Rules to Remember

Reporting Every Sale

The most important rule is completeness: report every sale, even if you received multiple Forms 1099-B or didn't receive one at all. The IRS receives copies of these forms from brokers and will notice if transactions are missing. Form 8949 has three checkbox categories at the top of each part—check the box that describes your transactions.

• Box A / D: Sale AND basis reported.
• Box B / E: Sale reported but basis NOT reported.
• Box C / F: Transaction not reported to the IRS.

Each category requires a separate Form 8949.

Short-Term vs. Long-Term

Understanding the holding period is crucial for proper classification. Count from the day after you acquired the property through the day you sold it.

• One year or less: Short-term (Part I).
• More than one year: Long-term (Part II).
• Inherited property: Always long-term.

Wash Sale Rules

If you sell stock at a loss and buy substantially identical stock within 30 days before or after the sale, the loss is disallowed. Use:

• Code “W” in column (f)
• Enter the disallowed loss as a positive number in column (g)

Correcting Cost Basis

When your broker reports incorrect basis information, you can make adjustments in column (g), but you must use proper codes in column (f). Never alter 1099-B amounts without documentation. Missing basis often requires contacting brokers or researching historical records.

Special Situations

Certain transactions have unique requirements:

• Empowerment zone investments
• Qualified small business stock
• Like-kind exchanges

Refer to IRS Publication 551 if basis data is missing.

Step-by-Step Process (High Level)

Step 1: Gather Documents

Collect all Forms 1099-B and other records of property sales (e.g., Form 1099-S for real estate). Organize them into:

• Short-term vs. long-term
• Basis reported vs. not reported

Step 2: Complete Part I (Short-Term)

For each sale:

1. Column (a): Description (e.g., “100 sh. Apple Inc.”)
2. Column (b): Date acquired
3. Column (c): Date sold
4. Column (d): Proceeds
5. Column (e): Cost basis
6. Column (f): Adjustment code (if needed)
7. Column (g): Adjustment amount
8. Column (h): Gain or loss (auto-calculated)

Step 3: Complete Part II (Long-Term)

Follow the same structure as Part I.

Step 4: Totals and Transfer

Total columns (d), (e), (g), and (h). Transfer subtotals to Schedule D:

• Short-term → lines 1b, 2, or 3
• Long-term → lines 8b, 9, or 10

Schedule D combines everything into your overall capital gain/loss.

Common Mistakes and How to Avoid Them

Incorrect Basis Reporting

Many taxpayers leave basis blank or enter zero despite having records. Always match Form 1099-B values unless you have proper documentation for corrections.

Mixing Transaction Categories

Each Form 8949 page must use only one of:

• Box A, B, C (short-term)
• Box D, E, F (long-term)

Mixing them guarantees IRS matching issues.

Wash Sale Confusion

Wash sale losses must be:

• Reported with code “W”
• Added back as a positive number in column (g)

Missing Broker-Reported Sales

Failing to report a sale shown on a 1099-B almost always triggers an IRS notice.

Incorrect Adjustment Codes

Every adjustment must have the correct code and supporting documentation. Use exact numbers—IRS matching is precise.

What Happens After You File

IRS Matching System

The IRS compares:

• Your Form 8949
• Broker-reported Forms 1099-B

This happens months after filing.

If Everything Matches

Your return processes normally.

• Refund issued or payment applied
• Long-term gains receive preferential rates
• Up to $3,000 capital loss deduction allowed annually

If Discrepancies Exist (CP2000 Notice)

A CP2000 proposes changes when the IRS finds mismatches. Common triggers:

• Unreported sales
• Incorrect basis
• Missing wash sale adjustments

Taxpayers can respond with documentation to correct or dispute the adjustments.

Reporting Transactions Without 1099-B

Box C or F transactions (e.g., collectibles, real estate) depend heavily on your own documentation. Audits may occur if amounts seem unusual or unsupported.

FAQs

#### Do I need to report the sale even if I didn't make any money or lost money on the investment?

Yes. The IRS receives a copy of every 1099-B, and unreported sales are treated as if you earned the full proceeds as gain.

#### My broker sent me a corrected Form 1099-B after I already filed—what should I do?

File Form 1040-X with a corrected Form 8949. Even minor corrections should be updated to avoid mismatches and notices.

#### What if I inherited stock from my grandmother and have no idea what she paid for it?

Inherited assets use the date-of-death fair market value as basis. Contact the executor or use Form 706/Schedule A data.

#### Can I just enter totals from my brokerage year-end summary instead of listing every single transaction?

No. The IRS requires transaction-level detail on Form 8949. You may attach a substitute broker statement only if it matches the Form 8949 format.

#### I sold some stock at a loss in December and bought the same stock back in January—is there a problem?

If the purchase is within the 30-day window, you have a wash sale and cannot deduct the loss now. It is added to the basis of replacement shares.

#### What happens if I accidentally reported something on the wrong part of Form 8949—short-term instead of long-term?

You must file a corrected or amended return. Long-term and short-term are taxed differently, so misclassification is a significant error.

#### I sold my rental property that I converted from my personal home years ago—does this go on Form 8949?

Usually no. Rental property sales typically go on Form 4797, not Form 8949. Special rules apply, including unrecaptured §1250 gain considerations.

‍