So you’ve sold some stocks, bonds, mutual funds, or other investments, and tax time has arrived. Any time you sell an asset that is determined to be a capital asset, you have to determine your holding period and gain or loss and report it on Schedule D.
There are a few caveats with Schedule D, though, and its accompanying forms.
So Can I Report My Gains or Losses Directly on Schedule D?
Schedule D has a partner form, called Form 8949. Schedule D is the summary of the transactions that are required to be broken out on Form 8949.
If the only assets sold are normal investments of stocks, bonds, or mutual funds, and they are covered with no adjustments needed, you may report them directly on the Schedule D of Form 1040.
These are broken out on Schedule D as the sum or the short-term investments and then the long-term investments.
So When Would I Have to Use Form 8949?
If your investments are noncovered, you would have to break out each sale on Form 8949 and then carry the results to Schedule D.
The terms noncovered and covered securities simply refers to whether the basis of your investment was required to be reported to the IRS.
If you had purchased your investment prior to 2012 then your investment is likely considered noncovered and the basis likewise not reported to the IRS.
Because the basis is not reported to the IRS, it is your responsibility to break out the transactions on Form 8949 for the IRS’ scrutiny.
If you’ve sold many, many investments and would not like to use Form 8949, you may mail in Form 8453 separately and attach with it a print-out of all investments sold and their details from your brokerage company.
If you would like to skip mailing, some tax software supports the ability to include your investment details as a PDF to include with your e-filed tax return.
Is Having Noncovered Securities the Only Reason I Would Have to Use 8949?
While there are many reasons you would have to use Form 8949 in addition to Schedule D, two are most common: Having noncovered securities, like we’ve discussed, or having an adjustment to your investments that needs to be reported.
If you have an adjustment that needs to be made, such as a wash sale disallowed, you would need to file Form 8949 with Schedule D to show this detail.
Generally, Form 8949 is needed whenever more detail is needed than just what is shown on Schedule D.
For questions regarding this topic, please leave a comment below and we would be happy to help.
This article should not constitute legal or tax advice. For help regarding your situation, please consult a local advisor.