due_logo
Search
Close this search box.

Table of Contents

Form 8949



Definition

Form 8949 is a tax form issued by the United States Internal Revenue Service (IRS) for taxpayers who have sold, traded, or otherwise disposed of capital assets within the tax year. This includes items such as stocks, bonds, and property. The form is used to report capital gains or losses and to reconcile amounts that were reported to the taxpayer on Forms 1099-B or 1099-S.

Phonetic

The phonetics of the keyword “Form 8949” are: F – /ef/O – /oʊ/R – /ɑːr/M – /ɛm/Space8 – /ˈeɪt/9 – /ˈnaɪn/4 – /ˈfɔːr/9 – /ˈnaɪn/

Key Takeaways

1. Form 8949: This is a form issued by the Internal Revenue Service (IRS) in the United States. Form 8949 is used by individuals, corporations, trusts and estates who have sold or traded traded stocks, bonds, commodities, or other assets for the purpose of calculating capital gains or losses.

2. Reporting: All sales, exchanges, or disposals of capital assets, even if you have no gains or losses, must be reported on Form 8949 before recording on Schedule D, Form 1040. The IRS uses the information provided on the form to match the amounts that individuals and businesses reported on their tax returns with the amounts that brokers reported to the IRS on Form 1099-B.

3. Types of Transactions: There are different parts on Form 8949 for reporting short-term and long-term transactions. A short-term transaction is one that you held one year or less and a long-term transaction is one that you held more than one year. Depending on the type of transaction, the taxation rate can change.

Importance

Form 8949 is significant in business/finance as it is a specific tax form used by individuals, partnerships, corporations, trusts, and estates in the United States. This form is necessary for reporting the sales and disposals of capital assets, including stocks, bonds, and real estate, to the Internal Revenue Service (IRS). Accuracy in reporting these transactions is crucial as they may result in capital gains or losses, which significantly impact an individual or entity’s overall tax liability. Therefore, Form 8949 plays a critical role in ensuring tax compliance and precise calculation of income tax owed or any allowable deductions, credits, or losses, supporting clear, accurate, and lawful financial reporting.

Explanation

Form 8949 is a tax document utilized by individuals, businesses, and corporations in the United States for recording capital gains and losses during a fiscal year. This form is instrumental in computing the amount of tax owed on investment holdings based on the IRS capital gains tax structure. It includes the details of each sale or transaction, such as the asset’s acquisition cost, selling price, and the resulting capital gain or loss. Form 8949 provides a systematic means for taxpayers to disclose this information to the IRS in a structured and comprehensible way.The primary purpose of Form 8949 is to calculate the total net capital gains and losses incurred by a taxpayer in a year with precision. These gains or losses could be realized through a multitude of transactions, involving the sale of stocks or bonds, real estate properties, or about any type of capital asset. This detailed breakdown then feeds into Schedule D of Form 1040, where aggregate capital gains and losses are computed for the year. Hence, Form 8949 assists in ensuring taxpayers pay the appropriate amount of tax on their profits and claim the right amount of reduction in case of capital losses.

Examples

Form 8949 is a tax form used for reporting sales and exchanges of capital assets, including stocks, bonds, and real estate. Here are three real-world examples of situations where you might need to use this form:1. Stock Trading: Suppose you’ve been trading stocks and have sold some for a profit or loss during the tax year. You would need to fill out Form 8949 to report these transactions. You will need to list all your sales, including the date you acquired the stock, the date you sold it, your cost basis (purchase price), the proceeds from the sale, and the gain or loss.2. Real Estate Sale: If you sell a piece of real estate that is not your primary residence, you would likely need to report that on Form 8949 as well. For instance, if you have a rental property and you decide to sell it, the details of that sale including any gains or losses would have to be reported on this form.3. Sale of Collectibles: If you sell collectibles such as coins or art for a profit, this again would need to be reported on form 8949. For instance, if you have purchased a painting for $1000 and later sold it for $2000, you have a capital gain of $1000, which is reportable on Form 8949.

Frequently Asked Questions(FAQ)

What is Form 8949?

Form 8949 is a document issued by the U.S Internal Revenue Service (IRS). It is used to report sales and exchanges of capital assets, including stocks, bonds, and real estate.

Who needs to file Form 8949?

Any individual, corporation or entity that has sold or exchanged a capital asset within the tax year needs to file Form 8949.

How is Form 8949 related to Schedule D of Form 1040?

The information listed on Form 8949 is used to fill out Schedule D of Form 1040. Schedule D determines the total gain or loss from transactions reported on Form 8949 and other sources.

What information do I need to fill out Form 8949?

You will need information such as the description of property, dates of acquisition and sale, proceeds from the sale, cost basis or other basis, adjustment codes, and amounts.

What are the three parts of Form 8949 and what do they signify?

Form 8949 is divided into three parts: Part I for short-term transactions, Part II for long-term transactions, and Part III for reporting aggregate sales price for 1099-B.

Can I file Form 8949 online?

Yes, Form 8949 can be filed online through IRS approved tax software or with the help of a tax professional.

What happens if I have made a mistake while filling in my Form 8949?

If you realize a mistake after filing, you can file an amended return using Form 1040X along with a corrected Form 8949.

What are the penalties for not filing Form 8949?

Failure to report income from the sale or exchange of a capital asset can result in penalties and interest charges. It’s best to consult with a tax professional if you’re unsure about the need to file Form 8949.

How can I learn more about Form 8949?

You can learn more about Form 8949 by visiting the IRS website, or consulting with a tax professional.

: When is the deadline to file Form 8949?

Form 8949 should be filed with your yearly tax return, which is generally due on April 15 of the year following the reported sales or exchanges.

Related Finance Terms

  • Capital Gains and Losses
  • Internal Revenue Service (IRS)
  • Schedule D (Form 1040)
  • Cost Basis
  • Short-Term and Long-Term Investments

Sources for More Information


About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More