What Schedule D (Form 1040) Is For
IRS Schedule D (Form 1040) (2014) records capital gains and losses from the sale or exchange of capital assets during the 2014 tax year. The form applies to transactions involving mutual funds, exchange-traded funds, real estate, or other investments that influence taxable income. It provides the IRS with accurate information supporting each individual's income tax return.
Taxpayers use Schedule D to summarize figures from Form 8949, including short-term capital gains, long-term gains, and loss adjustments. The form ensures that reported amounts correspond to gross income and other forms of investment income, such as interest income or reinvested dividends. Completing Schedule D accurately supports federal return verification and reduces discrepancies during electronic filing.
When You’d Use Schedule D (Form 1040)
Taxpayers use Schedule D (Form 1040) when reporting gains or losses from the sale or exchange of capital assets such as property, mutual funds, or exchange-traded funds. The form is required when those transactions affect taxable income or result in additional tax on the federal return. It is also necessary for individuals filing an amended return to correct previously reported investment information.
Schedule D organizes short-term and long-term transactions into three columns showing sales proceeds, cost basis, and related adjustments. Taxpayers include supporting documents such as brokerage statements, purchase confirmations, and records of expenses paid. These details provide the IRS with evidence of accurate reporting and support the correct calculation of tax liability.
Taxpayers generally use the form when a holding period or realized gain requires detailed reporting and submission of additional forms. The Individual Tax Forms page provides access to related IRS schedules.
Key Rules or Details for 2014
The IRS applied specific rules to capital gains and losses reported on Schedule D (Form 1040) for the 2014 tax year. Short-term gains apply to assets held for one year or less, and long-term gains apply to assets held for longer periods. These distinctions determine how the income affects the taxpayer’s overall liability on the federal return.
Taxpayers needed to report transactions on Form 8949 before transferring totals to Schedule D. In certain circumstances, they also needed to file an amended return if their original tax return contained errors or missing information. Each correction required accurate documentation and clear calculations for every gain, loss, or adjustment.
The IRS allowed revisions to secure an original refund or update prior filings when the figures changed after review or clarification.
Step-by-Step (High Level)
Completing Schedule D (Form 1040) for the 2014 tax year required careful attention to every reporting step. Each step ensured accurate reporting of short-term and long-term capital gain transactions that affected the taxpayer’s filing status and total tax owed. The process also confirmed that each entry aligned with other parts of the individual income tax return.
Step 1: The taxpayer must gather Forms 1099-B, sale receipts, and documentation for each asset sold during the current year.
Step 2: The taxpayer lists each sale on Form 8949 and includes the purchase and sale dates to identify the holding period.
Step 3: The taxpayer applies the wash sale rule to transactions involving a substantially identical security to prevent disallowed losses.
Accurate completion supports taxpayers filing as married filing jointly or separately and ensures correct final figures on Schedule D.
Common Mistakes and How to Avoid Them
Taxpayers frequently make errors when completing Schedule D (Form 1040), which can affect the accuracy of their federal return. These mistakes often arise from skipped forms, incomplete figures, or misapplied tax rules. Reviewing all calculations carefully before electronic filing ensures accuracy and compliance with IRS requirements.
Common Mistakes and How to Avoid Them
1. Missing Form 8949
- How to avoid it: Complete Form 8949 before transferring totals to Schedule D to ensure that all sales are properly recorded.
2. Incorrect Cost Basis
- How to avoid it: Verify each transaction against your broker statements, and make sure all reinvested dividends are included when calculating the correct cost basis.
3. Misapplied Wash Sales
- How to avoid it: Review the 30-day purchase window to identify any transactions that would trigger a disallowed loss under wash-sale rules.
4. Omitted Signatures or Dates
- How to avoid it: Ensure that every submitted form includes all required signatures and dates before sending it to the IRS.
Checking every entry ensures timely processing and prevents unnecessary IRS correspondence. Access the IRS Form Help Center for support with required schedules.
What Happens After You File
After taxpayers file Schedule D (Form 1040), the IRS reviews the submitted information to ensure that all gains, losses, and deductions are accurate. The review process follows each IRS rule and compares data with broker reports and other income sources. This step confirms that every amount reported complies with both federal and state filing requirements.
If discrepancies appear, the IRS may request taxpayers to verify details or correct their original return. These requests often relate to differences in reported sales, higher cost basis figures, or incomplete supporting documentation. The IRS may also require taxpayers to provide state forms that clarify information submitted with their state tax returns.
The IRS follows specific rules when reviewing amended returns and deduction claims. Properly organized records allow taxpayers to resolve any issues quickly and maintain accurate filings for future compliance.
FAQs
How do I file an amended return if I made errors on my original filing?
Taxpayers can file an amended return using Form 1040-X to correct original figures from their federal return. The IRS allows filers to adjust income, deductions, or credits and provide additional information when needed. Amended forms may also include changes affecting state tax liability or tax payments.
Can I e-file Form 1040-X for the current tax year?
The IRS now allows taxpayers to e-file Form 1040-X for the current tax year. Electronic filing provides faster processing and helps track submission status more easily. Taxpayers should ensure that any additional refund or unused credit is properly entered before submission.
How should I report transactions involving the same security?
Transactions involving the same security or the same CUSIP number must be entered correctly in column B. Accurate entry ensures that gains, losses, and cost basis amounts match broker data. The IRS may request supporting documentation if mismatches occur during its review.
Can I include mutual funds in my individual income tax return?
Yes. Mutual funds must be reported on the individual income tax return if sales result in gains or losses. Taxpayers should review Forms 1099-B and 1099-DIV and include accurate cost basis information when completing Schedule D.
How will I receive my additional refund after corrections are made?
Once the IRS processes the amended return, taxpayers typically receive an additional refund through direct deposit. The refund amount depends on the differences between the corrected entries and the original filing. If taxpayers file jointly, the IRS may verify both individuals’ information, including the other spouse’s data, before approving the refund.
