Form 8949 is used to report the following information:
- The sale or exchange of a capital asset not reported elsewhere in the tax return.
- Gain from involuntary conversion (other than from casualty or theft) of a nonbusiness capital asset.
- Nonbusiness bad debt.
- The worthlessness of a security.
- The election to defer capital gain invested in a qualified opportunity fund (QOF).
- The disposition of interest in a QOF.
When entering information in the Form 8949 menu in TaxSlayer Pro, always enter exactly what shows on the form or statement for the sales price and cost basis. If any adjustments are needed, you'll be provided with separate menu lines for making those adjustments. The summary of the transactions reported on Form 8949 flows to Schedule D.
A 1099-B reporting a regulated futures contract, a foreign currency contract, or a section 1256 option contract only will include information in Boxes 1a, 8-11, and possibly 4. Don't enter that information here but enter it directly on Form 6781, Gains and Losses From Section 1256 Contracts and Straddles. See here for more information about Form 6781.
If the brokerage company withheld federal income tax, this amount will be entered in Other Federal Withholdings under the Payments, Estimates & EIC menu. Be sure to enter it in the field for tax withheld on Form 1099.
To complete Form 8949 and Schedule D, from the Main Menu of the tax return (Form 1040) select:
- Capital Gain/Loss (Sch D)
- New - Enter information about the asset:
- Description of Property - Use a description similar to the description on Form 1099-B.
- For stock, indicate the ticker symbol and number of shares, e.g., 100 SHARES XYZ.
- For virtual currency, include the name and amount.
- For a regulated futures contract, enter RFC.
- For a Section 1256 option, enter SECTION 1256 OPTION.
- For a QOF, enter only the EIN of the QOF.
- Form 1099-B Type - three options are available:
- Box 12 Cost Basis Reported to the IRS - Select if the check box in Box 12 (after 2018) or Box 3 (2018 and prior) is checked.
- Box 12 Cost Basis NOT Reported to the IRS - Select if the check box in Box 12 (after 2018) or Box 3 (2018 and prior) is not checked.
- Form 1099-B Not Received - Select this if the transaction was not reported on Form 1099-B, e.g., reported on Form 1099-S or not reported on any form.
- Date Acquired - If reported on Form 1099-B, use the date in Box 1b. The date may be missing if the securities were noncovered (Box 5 is checked) or if they were purchased on various dates. In these situations the taxpayer may need to provide more information. For an expired option that was written, enter the expiration date. Choose one of the dropdown menu options if applicable:
- Various - Short-Term - Securities purchased on various dates but all within 1 year of the sale date.
- Various - Long-Term - Securities purchased on various dates but all more than 1 year before the sale date.
- Inherited - Short-Term - This would be unusual. One example would be inherited property from someone who also inherited the property and both decedents died within a 1-year time span.
- Inherited - Long-Term - Virtually all inherited assets would use this for date acquired.
- Date Sold - If reported on Form 1099-B, use the date in Box 1c. Enter the date or choose one of the dropdown menu options if applicable:
Bankrupt - Short-Term
Bankrupt - Long-Term - Example: Nonbusiness bad debt due to bankruptcy.
Worthless - Short-Term
Worthless - Long-Term - A security is worthless if it has no value, but it can also include a security the taxpayer has abandoned.
Deferred QOF - Short-Term
Deferred QOF - Long-Term - Use one of these if the taxpayer has invested a capital gain in a QOF.
Various - Short-Term (Not Electronic)
Various - Long-Term (Not Electronic) - The IRS does not allow VARIOUS as a sale date, so if one of the Various options is chosen for Date Sold the return will not be able to be e-filed. To be able to e-file the return, enter a date even if you are summarizing an aggregate of short- or long-term sales.
- Sales Price - Enter the sales price or choose one of the dropdown menu options if applicable:
- Expired - Select this if the expired option is a capital asset. (Expired Section 1256 contract options are not reported here but on Form 6781.)
- Worthless - Use this if a nonbusiness debt is determined to be uncollectable. (Enter business bad debts as an expense of the business, not here.)
- Cost - Enter the cost basis.
- The basis of property acquired by gift is generally the donor's basis.
- The basis of inherited property is generally the fair market value at the date of death.
- Choose EXPIRED from the dropdown menu if applicable, e.g., a written option that has expired.
After entering the initial information about the transaction, you will arrive at the Capital Gains & Losses Information Menu where you can:
- double-check your work;
- indicate any adjustments;
- indicate for a MFJ return if the transaction is for the taxpayer, spouse, or jointly held.
An adjustment might be indicated on Form 1099-B, such as a wash sale, but an adjustment might also be needed in other circumstances, such as if a capital gain is being postponed or excluded or a capital loss is disallowed. (See the Form 8949 instructions here for an explanation of all the adjustment codes.)
- If an adjustment is needed, select Adjustment Code and choose the code that applies. For example, if the transaction has an adjustment code of "W" for wash sale, select W. Select Ok when done.
- Select Adjustment to Gain/Loss and enter the amount of the adjustment. The amount entered is subtracted from the net gain or loss, so enter the adjustment as a positive number if adjusting a gain, enter as a negative number if adjusting a loss. In the wash sale example, enter the same number as the amount of the gain or loss so that the net gain/loss will equal zero.
- Multiple Forms 8949 may be present in the tax return, as each "Form 1099-B type" is reported on its own form.
- QOF investments should be listed separately by investment, with one exception: investments of eligible capital gains of the same character on the same date into the same QOF can be grouped into a single entry.
Note: This is a guide for entering transactions on Form 8949 in the TaxSlayer Pro program. This is not intended as tax advice.