In the previous years, the reporting of most capital gains and losses arising from transactions relating to investment property was done on the IRS schedule D or D-1. From 2011 on, the IRS however, requires that such incomes and losses be reported on Form 8949, sales and other dispositions of capital assets.
Below are eight vital facts on the new Form 8949 and IRS schedule D, Capital gains and Losses:
1. Short term capital gains , or losses; “short term” implying that the assets are held for a period not exceeding a year; are now reported on Part 1 of Form 8949
2. Long term capital gains or losses (assets held for more than one accounting period) are now reported on Part 2 of form 8949.
3. Form 8949 should be filled prior to filling lines 1,2,3,8,9 or 10 of Schedule D
4. Most property owned and used for private purposes, recreation, or investment is now regarded as a capital asset. The Form 8949 should be used to report the disposal or exchange of a capital asset excluded from any other schedule or form, such as Forms 6252 or 8824
5. Based on what has been indicated in box 3 of the Form 1099-B or substitute statement, you are required to check Box A, B or C at the top of each Form 8949 filed. The following criteria should be applied;
a. Please check box A if your broker reported to you the transaction, and to IRS, the basis of the securities sold
b. Check box B if the transaction was reported to you, but box 3 in Form 1099-B is blank, or if according to the statement the basis was not reported to the IRS
c. If the transaction does not fall under the above categories, check box C
6. As many Forms 8949 as necessary may be used to record multiple transactions. Ensure each form 8949 includes only the category of transaction described in the text for the boxes checked (according to 5 above)
7. The means of reporting certain transactions has changed. If it is necessary to adjust your gain or loss, you may have to enter a code in column (b) and an adjustment in column (g). For more details, refer to the 2011 Instructions for schedule D and form 8949.
8. Also note that as from transactions in 2011, the Schedule D-1 is no longer applicable. It has been replaced by Form 8949.