Simplify Your Gains and Losses Reporting with Form 8949

What Is Form 8949 and How to Use It

January 24, 2025

Accurate financial reporting and compliance with Internal Revenue Service (IRS) requirements means you need to understand tax forms. If you complete these forms properly, it can help you maximize your tax benefits during income tax preparation. One important tax document that often raises questions is Form 8949.

Our team at Lewis CPA has put together this comprehensive guide that will explain what Form 8949 is, its purpose, and how to use it effectively for reporting capital gains and losses.

What Is an IRS Form 8949?

IRS Form 8949 (Sales and Other Dispositions of Capital Assets) is a tax form used to report capital gains and losses from investments. This document works in conjunction with Schedule D of your tax return to provide detailed information about your investment transactions throughout the tax year.

Who Should File Form 8949?

Individual taxpayers must file Form 8949 when they:

Sell or dispose of capital assets.
Have transactions reported on Form 1099-B or substitute statements.
Need to report capital gains or capital losses.
Have short-term or long-term transactions involving stocks, bonds, or digital assets.
Need to defer capital gain invested in a Qualified Opportunity Fund.
Have wash sales or other adjustments to report.

How to File Form 8949: A Step-by-Step Process

Correct capital gains and losses reporting assumes that you have accurately completed Form 8949. Let's discuss the process step-by-step to ensure you understand how to accurately prepare and file this tax form.

#1. Gather Required Information

Before you begin filling out Form 8949, gather all the necessary information. This includes Form 1099-B from your broker, detailing your brokerage transactions. You'll also need your own records to verify the purchase price and sales price for each asset, including the dates of acquisition and disposition. In this step, accurate cost-basis information is vital. Finally, gather details about any wash sales or other adjustments that may affect your reported gains or losses.

#2. Organize Transactions

Next, you’ll want to organize your transactions to streamline the completion of Form 8949. Separate short-term transactions (held for one year or less) from long-term transactions (held for more than one year). Organize transactions by whether or not they were reported to the IRS on Form 1099-B. For each transaction, carefully calculate the gain or loss.

#3. Complete the Form

With your information organized, you can now complete Form 8949. Start by checking the appropriate box (A-F) that indicates the type of transaction. Then enter the transaction details in the designated sections of the form, including the sales price, cost basis, and any necessary adjustments. Finally, calculate the total gain or net loss for both short-term and long-term transactions.

#4. Transfer Information

The final step involves transferring the information from Form 8949 to Schedule D (Form 1040), Capital Gains and Losses. Include the completed Schedule D with your tax return.

Which Types of Investment Transactions Are Reported on Form 8949?

Form 8949 is the primary IRS form used to report the sale or exchange of capital assets. It covers various types of transactions, including:

Traditional Securities	Digital Assets	Other Capital Assets
Stocks and stock splits, bonds, mutual funds, and other securities	Cryptocurrency transactions, NFTs, and other digital investments	Real estate (for investment purposes), collectibles, business assets, and involuntary conversions

In summary, Form 8949 is a comprehensive tool for reporting a broad spectrum of capital transactions, from the sale of stocks and bonds to the disposition of cryptocurrency and other digital assets.

The Pros and Cons of Form 8949

While Form 8949 is the primary method for reporting capital gains and losses, it's important that you understand both its benefits and limitations. Let's look closer at the advantages and disadvantages of utilizing Form 8949 for your tax reporting needs.

Pros	Cons
Provides organized tracking of capital gains and losses.	Can be complex with multiple transactions.
Helps ensure accurate tax reporting.	Requires detailed record-keeping.
Supports claims for dividends received deduction.	May need separate forms for different transaction types.
Allows for reporting of wash sales and adjustments.	Time-consuming for investors with many trades.
Facilitates correct basis reporting.	Might require professional assistance.
Enables proper tax treatment of long-term capital gains.	Complex calculations for certain transactions.

Understanding these pros and cons helps investors better prepare for their tax reporting obligations and maintain accurate records throughout the year. Our Lewis CPA team can help you navigate the complexities of Form 8949 while maximizing your tax advantages. Let's make sense of your investment tax reporting and ensure compliance with IRS requirements!

Get Expert Assistance with Form 8949 with Lewis CPA

Form 8949 is an essential document for accurately reporting your capital gains and losses to the IRS. By carefully completing Form 8949, you ensure that your tax obligations are met and that you can claim any eligible deductions. While Form 8949 can seem complex, understanding the basic principles and utilizing available resources can simplify the process.

Don't let investment tax reporting overwhelm you. Our full-service public accounting firm has helped everyone from individuals to corporations. Contact Lewis CPA today to schedule a consultation with one of our tax professionals and ensure your capital gains and losses are reported accurately and efficiently.

FAQ

Maximize Your Tax Benefits with Form 8949

Let Lewis CPA handle your Form 8949, giving you peace of mind! Contact our expert team today to schedule your free consultation and simplify your tax preparation.

Talk to Us

We are a perfect combo of practical & optimistic.

Let’s Connect

Is Form 8949 the same as Schedule D?

No, Form 8949 and Schedule D serve different but complementary purposes. Form 8949 reports the details of individual capital asset transactions, including the purchase price, sales price, dates, and any adjustments. Schedule D, on the other hand, is a summary form that combines the totals from Form 8949 with other capital gains and losses to calculate your net capital gain or loss for the tax year. Think of Form 8949 as the detailed worksheet that feeds into Schedule D's final calculations.

Do I need to file Form 8949 if I have a 1099-B?

Yes, you typically need to file Form 8949 even if you have a Form 1099-B. The 1099-B provides information about your transactions, but Form 8949 is where you officially report these transactions to the IRS. However, if all your transactions are reported correctly on Form 1099-B with basis reported to the IRS, you might be able to summarize these transactions directly on Schedule D instead of listing them individually on Form 8949.

What happens if I make a mistake on Form 8949?

If you discover an error on your Form 8949 after filing, you may need to file an amended tax return using Form 1040-X. Common mistakes include incorrect basis amounts, wrong dates, or missing transactions. Correcting these errors as soon as possible is important to avoid potential issues with the IRS. Keep in mind that some corrections might affect your total capital gains or losses and could impact your tax liability.

How do I report crypto transactions on Form 8949?

Cryptocurrency transactions are reported on Form 8949 similarly to other capital assets. You'll need to include the date you acquired the cryptocurrency, the date you sold or exchanged it, your cost basis (what you paid for it), and the proceeds from the sale. List each transaction separately and indicate whether it was a short-term or long-term holding period. Be sure to maintain detailed records of all your crypto transactions throughout the year.

How many transactions can I list on one Form 8949?

Form 8949 has space for fourteen transactions per page. If you have more transactions than can fit on one page, you can use as many additional Forms 8949 as needed. However, you must use separate Forms 8949 for different types of transactions (e.g., short-term vs. long-term) and different checkbox categories (A through F). Each form should be properly labeled and totaled, with the combined totals carried forward to Schedule D.

If you choose to submit a formal written protest, include the following information:

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.