Being a U.S. taxpayer you need to fill out different tax forms when you file your annual tax return. About a few forms you have a clear idea while some other ones are a little bit difficult to understand. But no matter what, you will have to fill out every form that you are eligible for if you want to avoid any kind of penalty charges. IRS Form 8949 is one such tax form. If you have started wondering What is IRS Form 8949, What are IRS Form 8949 instructions then you do not have to worry? Here we are going to discuss this tax form in detail.
What is IRS Form 8949?
Taxpayers who are individuals, partnerships, corporations, trusts, and estates use this IRS form. With this form, they can report capital gains and losses from investment. With this form, you can report short- and long-term capital gains and losses from sales or investment exchanges. When a sale or taxable transaction is for a period of more than 12 months then it is a long-term transaction. And if a transaction is for a period of 12 months or less than that then it is a short-term transaction.
The IRS introduced IRS Form 8949 in 2011. Before that taxpayers used to report all such transactions only using Schedule D. Now taxpayers have to fill out a Schedule D and a Form 1099-B.
You May Also Read: IRS Form 8965?
Who Can File?
Taxpayers who are individuals, partnerships, corporations, trusts, and estates use this IRS form. With this form individuals can report the following:
- The sale or exchange of a capital asset not reported on another form or schedule
- Gains from involuntary conversions (other than from casualty or theft) of capital assets not used in your trade or business
- Non-business bad debts
- The worthlessness of a security
- The election to defer capital gain invested in a Qualified Opportunity Fund
- The disposition of interests in Qualified Opportunity Funds(s)
- Anyone filing a joint return must complete as many copies of the form necessary to report their transactions along with those of their spouse. The forms may be combined or separate, but the totals from every completed Form 8949 must be transferred to Schedule D for both spouses.
Along with all the things mentioned above, if you are filling out this form on the behalf of your corporation then you can report the sale of stock of a specified 10%-owned foreign corporation, adjusted for the dividends-received deduction under section 245A. But you can do so only when you generate a loss from this transaction.
How to File?
Whenever you sell a capital asset you get a capital gain or loss. And for tax purposes, you will have to report that gain or loss to the IRS. To report most capital gain (or loss) transactions you have to fill out the Schedule D of the IRS Form 1040. But before you can enter the net gain or loss on Schedule D, you have to fill out the IRS Form 8949. The transactions taxpayers must report on Form 8949. And brokerages report them annually to the IRS and to taxpayers using Form 1099-B. The IRS Form 1099 B is for Proceeds from Broker and Barter Exchange Transactions.
Now and again, Form 1099-B won’t report the cost premise of the resources. If so, the citizen must decide the premise add up to compute the increase or misfortune from a capital resource utilizing a different Form 8949. A capital resource exchange for which no Form 1099-B (or substitute proclamation) is given must be recorded on another Form 8949.
Form 8949 can likewise be utilized to address any errors in the information investigated Form 1099-B. In the event that the capital misfortunes or additions for the year are accounted for all resources on 1099-B with the right premise, a Form 8949 isn’t essential; Schedule D, in any case, should at the present document
Alongside the filer’s name and citizen distinguishing proof number, the structure has two sections that should be filled in. Part I is for short-term transactions and Part II is for long-term transactions. The short-term holding period is usually one year or less. And the long-term transactions are held for more than one year.
For each transaction, regardless of the fact whether it is a short-term or long-term transaction, you need to provide a total of seven different pieces of information.
- A description of the property
- The date on which it was acquired
- The date on which the property was sold or otherwise disposed
- The proceeds received on the sale
- Cost or other bases
- Adjustment to gain or loss
- Gain or loss
Other Relevant Forms:
By now it is also clear that you will also have to fill out Schedule D and 1099-B when you fill out the IRS Form 8949. With the IRS Form 1099-B, you can report the cost basis of the investor’s buy and sell transactions. And all the information about transactions that you mention in Form 1099-B and are in your own records will reflect on the IRS 8949 Form.
Things to Remember:
- Whenever you sell or exchange a capital asset, you need to fill out Form 8949 to report the gain or loss you generate.
- You will have to document both short-term and long-term transactions on this form.
- And you need to fill out all the details about the transactions. These details include the date of acquisition and disposition, the proceeds of the sale, and adjustment to gain or loss.
- Along with this form you also need to attach a completed Schedule D.
You May Also Read About: IRS Form 7004?
By now you must have got an idea what is the process to fill out the IRS Form 8949 and furthermore how troublesome it is. So it is significant for you to comprehend when you need to fill out this form. On the off chance that you have chosen to oversee everything all alone, at that point it is more significant. All things considered, staying aware of the apparent multitude of cutoff times can turn somewhat however hard for you. This is the reason the greater part of the individuals is considering recruiting a duty proficient nowadays. When you have someone to take care of all your tax-related things and tax forms, there can be no better things.
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