Reporting of capital gains and losses might appear a bit complicated in the beginning but much easier and fast once you understand how to fill Schedule D and Form 8949. A capital gain is considered as any extra amount that is generated due to a sale of a capital asset. Capital assets are things that you own, including stocks, collectibles. and personal belongings. If the transaction results in a loss, then you suffer a capital loss.
You are required by the IRS to report all capital gains to necessitate appropriate income tax payment but you can also make some tax deductions on some capital losses. A capital loss incurred as a result of selling stocks can be claimed but not one on the sale of your personal residence.
There are two varieties of capital gains and losses, long-term and short-term. Short-term capital assets are those owned for less than a year and if sold for either a higher or lower value than the purchasing price, you enjoy either a short-term capital gain or suffer a loss. On the other hand, long-term capital assets are things that you have owned for more than a year after buying them, which when sold can result in either a long-term capital gain or loss, depending on the difference between the purchasing price and the selling price.
You should seek the help of a broker when calculating capital gains or losses. Sale of stocks, mutual funds and bonds or other items that you sold through a broker are reported on your Form 1099-B, where the basis (the price you paid for an item) is recorded. If you get a 1099-B minus the basis reported, you can establish the right basis amount by checking your personal records. The basis is essentially used to determine whether a sale led to a gain or a loss. The new Form 8949 requires that you categories the items based on whether the basis was reported by the broker or not. In case it was reported for some items and not others, you might be forced to fill several Forms 8949.
The real information to be filled in Form 8949 is easy but the problem might be how to organize where to record the transactions. You need to come up with a list of all gains and loss, and then determine whether a 1099-B will be necessary for each transaction. Categorize the transactions in appropriate groups, based on whether they are short-term or long term, whether the basis was reported or not. To make your work easier, be as organized as possible.
Some of the details you need when working on the transactions include; date the asset was acquired and date sold, selling price and the purchasing price or the basis. You might need some codes, depending on the nature of transaction, but in rare cases.
With the IRS rules requiring that your broker helps you out with Form 8949, it is much easier to complete. Please have your records in order to lessen the work. Also, see to it that each 1099-B received is matched to the operation on the Form 8949. With this done, completing Schedule D will be a walk-over.