IRS Form 8949 For Active Traders and Investors

Beginning with the 2011 tax year the IRS requires active traders and investors who file a Schedule D to report their detailed trade history on Form 8949 - Sales and Other Dispositions of Capital Assets. This new form replaces the Schedule D-1 used in the past. The Schedule D form was also re-done in order to coexist with Form 8949. In this tax topic we will cover the basic format of Form 8949 and then specific instructions to help active traders and investors to complete this form.

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Basic layout of IRS Form 8949

IRS Form 8949 is laid out in two parts:

• Part I  - for Short-Term Capital Gains and Losses - Assets Held One Year or Less
• Part II - for Long-Term Capital Gains and Losses - Assets Held More Than One Year

The holding period of the trade is what determines whether it is long or short term. Anything held one year (365 days) or less is considered short term, and anything held for more than one year (366 days or more) is considered long term. Special wash sale rules can also change a short term holding to a long term holding period.

Each part of the form is identical when it comes to listing your trade activity for the current tax year.  There are seven columns in each part as shown below:

  From 2011 IRS Form 8949:

Each part of IRS Form 8949 has three categories, indicated by the check box at the beginning of each section:

• Category A - transactions reported on Form 1099-B with basis reported to the IRS
• Category B - transactions reported on Form 1099-B but basis not reported to the IRS
• Category C - transactions for which you cannot check box A or B for Category A or B

Because you may have transactions that fall into more than one of the above categories, it is possible that you will have up to three different Forms 8949 to file with your Schedule D (one for each category). The topic Understanding Form 8949 Categories discusses the factors which determine which trades are reported in each category.

TradeLog's Form 8949 is an exact replica of the IRS form and can be filed directly with the IRS. The totals from Form 8949 flow into the respective fields on IRS Schedule D. Your total capital gains or losses are then calculated using those numbers. TradeLog generates the Form 8949 you need for each category of transactions. All you will need to do is enter the totals from those forms on your Schedule D and you are ready to file taxes!

• View the 1040 IRS Form 8949
• View the IRS instructions for completing Form 8949 along with Schedule D

Now that you understand the basics, learn about how a trade's category is determined for Form 8949.