1. What the Form Is For

Form 8949 is the IRS form taxpayers use to report the sale or exchange of capital assets—essentially any investment or property that can generate a capital gain or loss when sold. It acts as the detailed transaction ledger behind your Schedule D (Capital Gains and Losses).

Capital assets include:

• Stocks, bonds, mutual funds
• Real estate (including your home in some cases)
• Cryptocurrency and NFTs (digital assets)
• Collectibles (art, coins, antiques)
• Certain business or investment property

Whenever you sell one of these assets for more or less than what you paid, you’ve realized a capital gain or loss, which must be reported to the IRS.

Form 8949 functions as the reconciliation tool between what third parties report to the IRS—via Form 1099-B (brokerage sales) or Form 1099-S (real estate transactions)—and what you include on your return. This helps the IRS confirm your gains and losses match broker-reported data, reducing the risk of notices or audits.

Form 8949 doesn’t calculate your tax by itself—it feeds into Schedule D, which summarizes your total gains and losses, and then to Form 1040, where your taxable income is determined.

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

You must file Form 8949 if you sold or exchanged any capital assets during the 2023 tax year (January 1–December 31, 2023).

Typical examples include:

• Selling stocks or ETFs through a brokerage
• Selling a rental property or second home
• Selling or trading cryptocurrency or NFTs
• Selling mutual fund shares or stock options

Normal Filing Deadline

Form 8949 is attached to your annual return (Form 1040), typically due April 15, 2024. If you requested an extension using Form 4868, your extended deadline was October 15, 2024.

Late or Amended Returns

If you missed the deadline or found errors after filing, submit:

• Form 1040-X (Amended U.S. Individual Income Tax Return)
• A corrected Form 8949 and Schedule D

You can amend a return up to three years after the original filing date (or two years after paying the tax, whichever is later). Common amendment triggers include:

• Corrected 1099-B received from your broker
• Missed or misreported crypto transactions
• Incorrect cost basis or holding period

If the amendment increases your tax owed, pay promptly to minimize penalties and interest.

3. Key Rules for 2023

Digital Assets Are Now Fully Enforced

2023 marked the IRS’s first full enforcement year for digital asset reporting.
You must report sales, trades, and exchanges of:

• Cryptocurrencies (Bitcoin, Ethereum, etc.)
• Non-fungible tokens (NFTs)
• Stablecoins or other tokenized assets

Crypto-to-crypto trades count as sales—you must report the fair market value of the asset sold in USD.

Short-Term vs. Long-Term Holding

• Short-term: Assets held 1 year or less, taxed at ordinary income rates (up to 37%).
• Long-term: Assets held more than 1 year, taxed at preferential rates (0%, 15%, or 20%).

You must report them separately—Part I of Form 8949 for short-term, Part II for long-term.

Broker Reporting Rules

Brokers must report both proceeds and cost basis for covered securities (generally those bought after 2010).
Form 8949 distinguishes between:

• Box A/D: Basis reported to IRS
• Box B/E: Basis not reported to IRS
• Box C/F: Transactions not reported on a 1099-B

Always match your form’s box to the 1099-B type.

Adjustment Codes (Column f)

You must explain any discrepancy between what’s reported to the IRS and what you’re reporting.
Examples:

• W – Wash sale loss disallowed
• B – Incorrect basis reported by broker
• H – Home sale exclusion
• O – Other adjustments
• Z – Qualified Opportunity Fund election

Qualified Opportunity Fund Deferrals

If you invested a gain in a Qualified Opportunity Fund (QOF) to defer tax, report the deferral on Form 8949 using code “Z.”

Summary Reporting Exception

If all transactions meet these conditions, you can report totals directly on Schedule D (no detailed Form 8949 required):

1. Basis reported to the IRS
2. No adjustments needed
3. IRS already received the data from your broker

However, most taxpayers still need to complete Form 8949.

4. Step-by-Step Guide (Simplified)

Step 1: Gather Your Documents

• 1099-B from broker(s)
• 1099-S for real estate sales
• Crypto exchange reports
• Purchase and sale confirmations

Step 2: Organize Transactions

Divide your transactions by:

• Holding period (short-term vs. long-term)
• Basis reporting type (A–F box categories)

Step 3: Choose the Correct Box

Each page of Form 8949 must have only one box checked.
Example:

• Box A (short-term, basis reported)
• Box E (long-term, basis not reported)

Step 4: Enter Each Transaction

For each sale, include:

ColumnWhat to EnterExample(a)Description of property50 shares XYZ Corp(b)Date acquired02/15/2021(c)Date sold05/10/2023(d)Proceeds$5,000(e)Cost/basis$4,200(f)CodeW (if wash sale)(g)Adjustment amount+$300(h)Gain/Loss$800

Step 5: Total Each Page

Add all columns (d), (e), and (g).
The totals transfer to Schedule D, lines 1b–3 (short-term) or 8b–10 (long-term).

Step 6: Complete Schedule D

Schedule D combines totals to calculate your net gain or loss.
If you have a net capital loss, you can deduct up to $3,000 ($1,500 if married filing separately) from ordinary income, with the remainder carried forward.

5. Common Mistakes and How to Avoid Them

MistakeConsequenceSolution1. Not matching 1099-BIRS mismatch notices (CP2000)Always use figures exactly as reported; adjust with codes if needed.2. Wrong box checkedIRS confusion or rejectionVerify if basis was reported (Box A/D) or not (Box B/E).3. Ignoring crypto/NFTsIRS penalties for underreportingReport all digital asset sales or swaps.4. Incorrect cost basisOverstated gains or lossesTrack splits, DRIPs, and corporate actions; use correct adjusted basis.5. Missing adjustment codesIRS disallowing correctionsAlways include the correct column (f) codes from the instructions.6. Summary reporting when ineligibleFiling errors or auditsOnly use Schedule D summary if your 1099-B explicitly says you can.7. Writing “available upon request”IRS rejectionYou must list every transaction unless exception rules apply.

6. What Happens After You File

• IRS Matching System: The IRS electronically compares your Form 8949 data with broker and exchange reports.
• If Everything Matches: Processing continues smoothly, refunds typically issue within 21 days for e-filed returns.
• If There’s a Mismatch: You may receive a CP2000 notice proposing additional tax. You can respond with explanations or corrected documentation.
• Audits: Rare, but large capital gains, crypto transactions, or inconsistent cost basis reporting can trigger them.
• Record Retention: Keep all documentation (purchase records, 1099s, broker statements, crypto exchange data) for at least 3 years—7 years if you claimed a worthless security loss.
• Loss Carryforwards: If your capital losses exceed your annual limit, carry them forward indefinitely until fully used.

7. Frequently Asked Questions (FAQs)

Q1: Do I need Form 8949 for mutual fund sales?
Yes—unless your 1099-B indicates basis was reported to the IRS and you have no adjustments, in which case you may use the Schedule D summary option.

Q2: How do I determine the basis for inherited stock?
The basis is the fair market value (FMV) on the date of death. Inherited property is always considered long-term regardless of how long you held it.

Q3: I traded one cryptocurrency for another—do I report it?
Yes. Each trade is a taxable event. Record the FMV of the crypto you gave up, your basis, and the resulting gain/loss.

Q4: What’s a wash sale?
Selling a security at a loss and repurchasing it (or a similar one) within 30 days before/after the sale disallows the loss. Use code “W” in column (f).

Q5: Can I just report my net gain or loss?
Only if every transaction qualifies under the summary reporting exception (basis reported, no adjustments, IRS copy confirmed). Otherwise, list details.

Q6: What if I forgot a transaction?
File Form 1040-X promptly with a corrected Form 8949 and Schedule D. The IRS will catch most omissions through data matching.

Q7: Do I need multiple Form 8949s?
Possibly. Use separate pages for each box category (A–F), but all flow into one Schedule D.

In Summary

Form 8949 is your detailed capital gains and losses report—the bridge between your brokerage statements and the IRS. With the 2023 expansion of digital asset reporting and stricter basis-matching rules, accuracy matters more than ever. Even a small mismatch can trigger IRS scrutiny, so use precise data, correct codes, and thorough documentation.

Sources

• IRS Form 8949 About Page
• 2023 Instructions for Form 8949 (PDF)
• 2023 Form 8949 (PDF)
• IRS Topic 409: Capital Gains and Losses
• IRS: File an Amended Return