What Form 8949 Is For

Form 8949 is the IRS form you use to report sales and exchanges of capital assets—essentially, property you own for investment or personal purposes. Think of it as the detailed transaction log that lists every stock sale, bond trade, real estate transaction, or other capital asset you sold during the tax year. The form was relatively new in 2013, having been introduced to help reconcile what your broker or financial institution reports to the IRS with what you report on your tax return.

Capital assets include stocks, bonds, mutual funds, real estate (other than your inventory if you're a dealer), and even collectibles like art or coins. When you sell these assets, you typically have either a capital gain (you made money) or a capital loss (you lost money). Form 8949 is where you list each transaction individually, showing what you sold, when you bought it, when you sold it, how much you received, and what it originally cost you. This detailed information then flows to Schedule D, where your overall capital gains and losses are calculated and your tax liability is determined.

The form serves as a critical bridge between the Forms 1099-B or 1099-S you receive from brokers and real estate transactions and the final numbers that appear on your tax return. For 2013, the IRS made this reconciliation mandatory to ensure taxpayers correctly reported their investment income and to catch discrepancies between what brokers reported and what taxpayers claimed.

When You’d Use Form 8949

You must file Form 8949 with your 2013 tax return if you sold or exchanged any capital assets during the year—whether you made money, lost money, or broke even. This includes stocks, bonds, mutual funds, options, real estate investment transactions, and most other investments. Even if you didn't receive a Form 1099-B from your broker (perhaps because you sold property directly to another person), you're still required to report the transaction.

The form is typically filed with your original tax return by the April 15, 2014 deadline (or October 15, 2014 if you filed for an extension). If you're filing a late return for 2013—perhaps because you missed the deadline or didn't realize you needed to file—you'd still need to include Form 8949 for any capital asset sales that year. Late filing may subject you to penalties and interest, but it's always better to file late than never.

For amended returns, if you discover errors in your original 2013 Form 8949 after filing—such as incorrect cost basis, missing transactions, or wrong holding periods—you'll need to file Form 1040X (Amended U.S. Individual Income Tax Return) and include a corrected Form 8949. Common reasons for amendments include receiving corrected 1099-B forms from brokers, discovering you used the wrong cost basis, or realizing you forgot to report certain transactions. The IRS generally allows you to amend returns within three years of the original filing deadline.

Key Rules or Details for 2013

The 2013 tax year marked an important transition for Form 8949 as cost basis reporting requirements expanded. Here are the critical rules that applied:

Broker Reporting Requirements: Brokers were required to report cost basis to the IRS for most stocks purchased in 2011 or later, mutual fund shares purchased in 2012 or later, and certain other securities. This information appeared on Form 1099-B in box 3 (basis) and box 6b (whether basis was reported to the IRS).

Holding Period Matters: You must separate transactions into short-term (held one year or less) and long-term (held more than one year). This distinction is crucial because long-term capital gains received preferential tax treatment in 2013. For taxpayers in the 10% and 15% tax brackets, the long-term capital gains rate was 0%. For most middle-income taxpayers, the rate was 15%. A new 20% rate applied to high earners whose income exceeded $400,000 (single) or $450,000 (married filing jointly). Additionally, the 3.8% Net Investment Income Tax took effect in 2013 for high-income taxpayers.

Categorization by Boxes: Form 8949 uses a checkbox system. Part I (short-term) has boxes A, B, and C; Part II (long-term) has boxes D, E, and F. Box A/D is for transactions where basis was reported to the IRS, Box B/E is for transactions where basis was NOT reported to the IRS, and Box C/F is for transactions not reported on Form 1099-B at all. You need separate copies of the form for each box you check.

Exception for Simple Transactions: If you had transactions reported on Form 1099-B showing basis was reported to the IRS, with no wash sale losses in box 5, and you don't need to make any adjustments, you could report these transactions directly on Schedule D without completing Form 8949. This shortcut (Exception 3) saved paperwork for straightforward sales.

Adjustments and Codes: Any time you need to adjust the proceeds, basis, or gain/loss, you must enter a code in column (f) explaining why. Common codes include "W" for wash sales, "B" for incorrect basis, "H" for home sale exclusion, and "E" for unreported selling expenses.

Step-by-Step (High Level)

Step 1: Gather Your Documents

Collect all Forms 1099-B from your brokers, Form 1099-S from real estate transactions, and your own records of any sales not reported on these forms. You'll need the purchase date, purchase price, sale date, and sale price for each transaction.

Step 2: Determine Short-Term vs. Long-Term

Count from the day after you acquired the property through the day you sold it. If it's 365 days or less, it's short-term (Part I). If it's 366 days or more, it's long-term (Part II). Inherited property is always treated as long-term regardless of how long you held it.

Step 3: Check the Appropriate Box

For each transaction, determine which box applies. Did you receive a Form 1099-B? If yes, look at box 6b—is it checked? If checked, the basis was reported to the IRS (use box A for short-term or D for long-term). If not checked or blank, basis wasn't reported (use box B or E). If you didn't receive a 1099-B at all, use box C or F.

Step 4: Complete the Columns

Fill in each row with: (a) description of the property (e.g., "100 shares XYZ Corp"), (b) date acquired, (c) date sold, (d) proceeds from the sale (from your 1099-B or actual proceeds), (e) your cost basis (from your 1099-B if reported, or from your records), (f) any adjustment codes if needed, (g) the adjustment amount if applicable, and (h) your gain or loss (proceeds minus basis, adjusted by any amount in column g).

Step 5: Calculate Totals and Transfer to Schedule D

Add up all the amounts in columns (d), (e), (g), and (h) at the bottom of each page. These totals get transferred to the appropriate lines on Schedule D, where your overall capital gain or loss is calculated and your tax is determined.

Step 6: Attach to Your Return

File Form 8949 along with Schedule D as part of your Form 1040. Keep copies of all supporting documentation for at least three years.

Common Mistakes and How to Avoid Them

Mistake #1: Wrong Holding Period Classification. Many taxpayers miscalculate the holding period and report long-term gains as short-term (or vice versa), which can dramatically affect tax liability. Avoid it: Count carefully from the day after purchase through the sale date. When in doubt, check box 1c on your Form 1099-B, which indicates whether your broker classified it as short-term or long-term.

Mistake #2: Incorrect or Missing Cost Basis. Taxpayers often forget to adjust basis for stock splits, dividend reinvestments, or return of capital distributions. Some simply leave the basis field blank or guess at the amount. Avoid it: Keep meticulous records from the time you purchase an asset. If you lost your records, contact your broker—they may have the information. For inherited property, obtain documentation of the fair market value on the date of death.

Mistake #3: Using the Wrong Box. Checking box A when box B applies (or vice versa) creates a mismatch with IRS records and can trigger notices. Avoid it: Carefully examine your 1099-B form, specifically box 6b. If it's checked, basis was reported to the IRS (use box A/D). If blank or unchecked, it wasn't reported (use box B/E).

Mistake #4: Forgetting to Report Transactions Without 1099-B Forms. If you sold property directly without going through a broker, you might not receive a 1099-B, but you still must report it. Avoid it: Review your bank statements and transaction records. Any sale of a capital asset must be reported, regardless of whether you received a form.

Mistake #5: Not Adjusting for Wash Sales. If you sold stock at a loss and bought substantially identical stock within 30 days before or after the sale, the loss is disallowed. Your broker may report this in box 5 of Form 1099-B, but if you made purchases at another broker, you must calculate and report the adjustment yourself. Avoid it: Track all your purchases across all accounts. Enter code "W" in column (f) and the disallowed loss as a positive number in column (g).

Mistake #6: Mixing Transactions from Different Categories on One Form. You cannot combine transactions where basis was reported to the IRS with those where it wasn't on the same copy of Form 8949. Avoid it: Use separate forms for each box you need to check. It's better to have multiple pages than one incorrect form.

Mistake #7: Arithmetic Errors. Simple math mistakes in calculating gain or loss are surprisingly common. Avoid it: Double-check your calculations, or better yet, use tax software that performs the calculations automatically.

What Happens After You File

After you file your 2013 tax return with Form 8949 and Schedule D, the IRS will process your return and match the information against what brokers and other third parties reported. This typically happens several months after filing, as the IRS uses automated systems to compare your reported amounts against their database of Forms 1099-B and 1099-S.

If everything matches and your return is error-free, you'll either receive your refund (typically within 21 days if you filed electronically) or receive a confirmation that your payment was accepted. The IRS will send you a notice if they find any discrepancies—for example, if you failed to report a transaction that appeared on a Form 1099-B they received, or if the amounts you reported don't match what was reported to them.

Common post-filing notices include CP2000 letters, which propose changes to your tax return based on mismatches. If you receive such a notice, don't panic. You have the right to respond with documentation explaining any differences. Sometimes the IRS information is wrong, or there may be legitimate adjustments (like cost basis corrections) that you reported correctly on Form 8949 but the IRS computer initially flagged.

Your capital losses can be particularly valuable after filing. If your capital losses exceeded your capital gains in 2013, you can deduct up to $3,000 of net capital loss against ordinary income (such as wages). Any losses beyond that amount carry forward to future tax years indefinitely—so your 2013 losses could reduce your tax bill in 2014, 2015, and beyond until fully used up.

Keep all documentation related to your Form 8949—including purchase confirmations, sale confirmations, Forms 1099-B, and any worksheets showing basis adjustments—for at least three years from when you filed. The IRS generally has three years to audit your return, though this period can be extended in certain circumstances.

FAQs

Q: Do I need to file Form 8949 if I only received $50 in capital gains from my mutual fund?

A: It depends. If these are capital gain distributions (reported in box 2a of Form 1099-DIV), you don't use Form 8949—you report them directly on Schedule D, line 13. Form 8949 is only for actual sales and exchanges of capital assets. If you sold mutual fund shares for a $50 gain, then yes, you must report this transaction on Form 8949.

Q: My broker sent a corrected 1099-B after I already filed. What do I do?

A: You'll need to file an amended return using Form 1040X and include a corrected Form 8949 with the accurate information. Don't ignore corrected forms—the IRS has the corrected information in their system and will eventually notice the discrepancy.

Q: Can I aggregate all my stock sales into one line instead of listing them separately?

A: Only in limited circumstances. For 2013, if all your transactions meet the criteria for Exception 3 (basis reported to the IRS, no wash sales, no adjustments needed), you can report the combined total directly on Schedule D without using Form 8949. Otherwise, each transaction must generally be reported on a separate row, though corporations and certain partnerships have additional exceptions.

Q: I inherited stock from my grandmother who passed away in 2013. How do I report this?

A: First, determine the fair market value of the stock on the date of your grandmother's death—this becomes your cost basis (this is called "step-up in basis"). When you eventually sell the stock, report it on Part II (long-term) of Form 8949, regardless of how long you actually held it. Enter "INHERITED" in column (b) where the date acquired would normally go.

Q: What if I genuinely don't know what I paid for a stock I bought 20 years ago?

A: Contact your broker first—they may have records. Check old tax returns, bank statements, or investment account statements. If you absolutely cannot determine your basis, the IRS requires you to use zero as the cost basis, which means the entire proceeds are treated as taxable gain. This is harsh but necessary, which is why keeping good records is crucial.

Q: I sold my vacation home in 2013. Does this go on Form 8949?

A: Yes, the sale of a vacation home (property not used as your main residence) is reported on Form 8949, Part II (assuming you owned it more than one year), checking box F. You'll report the full sales price and your adjusted basis (original cost plus improvements, minus depreciation if you rented it out). You cannot use the home sale exclusion that applies to primary residences.

Q: What happens if I forget to report a stock sale?

A: The IRS will likely send you a notice (usually a CP2000) proposing additional tax based on the unreported proceeds shown on the Form 1099-B they received. You'll need to either accept the additional tax or respond with documentation showing you did report it (perhaps you missed it when reviewing your return) or explaining why no tax is due (for example, if you had sufficient basis to offset the gain). It's always better to file correctly the first time or file an amendment if you discover the error before the IRS does.

Sources

IRS Form 8949 Instructions - 2013
IRS Form 8949 - 2013
About Form 8949, Sales and Other Dispositions of Capital Assets