Form 8949 is New for 2011 for sales of investments

Update on 2-28-2012: IRS publishes tips regarding capital gains and losses [IRS Tax Tip-2012-35]: IRS has published a list of 10 things taxpayers should know about capital gains and losses. The list includes the basics, such as definitions, the time periods involved in classifying a capital gain or loss as long-term or short-term, and various tax rates. Of particular importance, this year, a new form, Form 8949, Sales and Other Dispositions of Capital Assets, will be used to calculate capital gains and losses. As described by IRS, Form 8949 should be used to list all capital gain and loss transactions. “The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be calculated,” IRS explained. The IRS tax tip is available at http://www.irs.gov/newsroom/article/0,,id=106799,00.html
IRS has made preparing taxes more difficult with this new Form 8949 that is used to report not only sales proceeds but COST basis.  The new Form 8949 takes the place of Schedule D-1.  The IRS has found abuse in taxpayers underreporting capital gains because cost basis was higher than it should have been.  Here is more information from the IRS:

Eight Facts about New IRS Form 8949 and Schedule D

 
IRS Tax Tip 2012-28, February 10, 2012The IRS has a new form taxpayers must use to report most capital gains and losses from transactions relating to investment property. In previous years, these transactions would have been reported on your IRS Schedule D or D-1, but for tax year 2011, use Form 8949, Sales and Other Dispositions of Capital Assets.Here are eight important points about the new Form 8949 and IRS Schedule D, Capital Gains and Losses:

1. Short-term capital gains or losses (assets held for one year or less) are now reported on Part I of Form 8949.

2. Long-term capital gains or losses (assets held for more than one year) are now reported on Part II of Form 8949.

3. Fill out Form 8949 before you fill out line 1, 2, 3, 8, 9 or 10 of Schedule D.

4. Most property you own and use for personal purposes, pleasure or investment is a capital asset. Use Form 8949 to report the sale or exchange of a capital asset you are not reporting on another form or schedule (such as Form 6252 or 8824).

5. At the top of each Form 8949 you file, you’ll need to check box A, B or C, based on what is indicated in box 3 of the Form 1099-B or substitute statement.

  • Check box A if your broker reported the transaction to you and the basis of the securities sold also was reported to the IRS
  • Check box B if the transaction was reported to you but box 3 of the Form 1099-B is blank or your statement says the basis was not reported to the IRS.
  • Check box C for all other transactions.

6. If you have a lot of transactions, use as many Forms 8949 as necessary to report all of them, but make sure that each Form 8949 includes only the type of transactions described in the text for the box you checked (A, B or C).

7. The reporting of certain transactions has changed. If you have to adjust your gain or loss, you may have to enter a code in column (b) and an adjustment in column (g). For details, see the 2011 Instructions for Schedule D (and Form 8949).

8. For 2011 transactions, Schedule D-1 is no longer in use. Form 8949 replaces it.

 

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Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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