IRS Form 8949 Explained

IRS Form 8949, Sales and Other Dispositions of Capital Assets, is a tax form used to report capital gains and losses from the sale of stocks, bonds, cryptocurrency, and other capital assets.

What Is Form 8949?

Form 8949 is used to report detailed information about each capital asset transaction during the tax year. The information from Form 8949 is then summarized on Schedule D of your tax return.

When Do You Need Form 8949?

You must file Form 8949 if you:

• Sold stocks, bonds, or other capital assets
• Sold cryptocurrency or other digital assets
• Received a Form 1099-B that doesn't show basis
• Need to make adjustments to your cost basis
• Have transactions not reported on Form 1099-B

Parts of Form 8949

Part I - Short-Term Transactions

Report sales of capital assets held for one year or less. Short-term capital gains are taxed as ordinary income.

Part II - Long-Term Transactions

Report sales of capital assets held for more than one year. Long-term capital gains receive preferential tax treatment.

Required Information

For each transaction, you must provide:

• Description of the property sold
• Date acquired and date sold
• Proceeds from the sale
• Cost basis (what you paid for the asset)
• Adjustments to gain or loss (if any)
• Realized gain or loss

Common Mistakes to Avoid

• Failing to report all capital asset transactions
• Incorrectly calculating the holding period
• Using incorrect cost basis information
• Not accounting for stock splits or dividends
• Mixing up short-term and long-term transactions

Connection to Schedule D

The totals from Form 8949 are transferred to Schedule D, which calculates your overall capital gain or loss and determines the tax impact on your return.