Do I Need to File Form 8949 if I Have a 1099-B?

Selling stocks, cryptocurrencies, or other capital assets often comes with tax reporting obligations. If you received a Form 1099-B from your broker, you might wonder whether you also need to file Form 8949. The answer depends on how the IRS classifies your transactions and whether adjustments are required.

Capital Transactions That Require Form 8949

Form 8949 reports sales and exchanges of capital assets before transferring the information to Schedule D. The IRS requires this form when a taxpayer sells stocks, bonds, real estate, or other investments that trigger a taxable event. Each transaction must be listed separately unless a broker provides a consolidated statement with all necessary details.

One common reason for filing Form 8949 is the sale of publicly traded securities. If you sold company shares through a brokerage account or an employee stock purchase plan, the IRS requires details such as the acquisition date, sale date, proceeds, cost basis, and any necessary adjustments. Even if your broker reports this information on a 1099-B, you may still need Form 8949 if the cost basis is missing or incorrect.

Real estate sales may also require reporting. If you sold an investment property, you must report the sale price, purchase price, and any capital improvements that affect the adjusted basis. While primary residences may qualify for an exclusion on capital gains, investment properties do not.

Cryptocurrency transactions must be reported, as the IRS treats digital assets as property. Each sale, trade, or conversion into fiat currency is a taxable event. If you exchanged Bitcoin for Ethereum or used crypto to buy goods, these transactions must be recorded. Given crypto’s volatility, tracking cost basis and fair market value at the time of each transaction is essential.

Transactions Not Reported on This Form

Certain financial activities do not require Form 8949.

Personal-use property sales that do not generate a capital gain do not need to be reported. Items like furniture, electronics, or vehicles sold at a loss are not deductible. However, selling a collectible such as rare artwork or coins for a profit requires reporting and may be subject to a higher capital gains tax rate.

Transactions within tax-advantaged accounts such as 401(k)s and IRAs do not require Form 8949 unless a distribution occurs. Buying and selling stocks within these accounts does not trigger capital gains taxes. However, withdrawals from traditional IRAs and 401(k)s are taxed as ordinary income and must be reported elsewhere. Roth IRA withdrawals are tax-free if they meet the five-year holding period and other requirements.

Dividend reinvestments from mutual funds and ETFs do not require Form 8949 unless shares are sold. Many investors use automatic dividend reinvestment plans (DRIPs), where dividends buy additional shares. These reinvestments increase the cost basis but do not create a taxable event until shares are sold. When a sale occurs, the taxpayer must account for the adjusted cost basis, which can become complex with multiple reinvestments.

Adjustments That Typically Need to Be Reported

Certain adjustments must be made when reporting capital gains and losses.

Wash sales occur when a security is sold at a loss and repurchased within 30 days before or after the sale. The IRS disallows the loss and requires it to be added to the cost basis of the repurchased security, preventing taxpayers from claiming artificial losses while maintaining their investment positions.

Corporate actions such as stock splits, mergers, and spin-offs can also require adjustments. In a 2-for-1 stock split, the number of shares doubles while the cost basis per share is halved. Mergers and spin-offs often result in investors receiving shares in a new entity, requiring an allocation of the original cost basis between the old and new holdings based on fair market values.

Restricted stock units (RSUs) and incentive stock options (ISOs) introduce additional complexities. RSUs are taxed as ordinary income upon vesting, but any subsequent sale may result in a capital gain or loss that must be reported with an adjusted cost basis reflecting the amount already taxed as income. ISOs can trigger alternative minimum tax (AMT) consequences. If an employee exercises ISOs and holds the shares beyond the required holding period, the difference between the exercise price and fair market value at the time of exercise may need to be reported as an AMT adjustment.

Handling 1099-B Data With Form 8949

Brokers issue Form 1099-B to report proceeds from securities transactions, but the level of detail varies. Some reports include cost basis, while others only list gross proceeds. If cost basis is missing or incorrect, Form 8949 must be used to reconcile discrepancies before transferring the data to Schedule D. The IRS categorizes transactions into those reported with basis, without basis, or not reported to the IRS, requiring careful sorting to ensure accurate tax treatment.

Form 8949 is divided into short-term and long-term transactions. Short-term applies to assets held for one year or less and is taxed at ordinary income rates, which range from 10% to 37% in 2024. Long-term holdings, exceeding one year, benefit from capital gains rates of 0%, 15%, or 20%. The classification directly impacts tax liability, making precise record-keeping essential.

Brokers often report sales using the gross proceeds method, which does not account for commissions or fees. If a transaction includes such costs, they must be adjusted on Form 8949 to reflect net proceeds. For example, if stock is sold for $10,000 with a $50 commission, the reported proceeds should be reduced to $9,950. Failure to adjust these amounts could lead to overstated gains and higher tax obligations.

Consequences for Non-Filing

Failing to report capital transactions on Form 8949 when required can lead to IRS scrutiny, penalties, and additional tax liabilities. The IRS cross-references Form 1099-B with tax returns, and discrepancies can trigger automated underreporting notices. If the agency detects missing or incorrect information, it may assess additional taxes, interest, and penalties.

One common consequence is the failure-to-pay penalty, which accrues at 0.5% per month on unpaid taxes, up to a maximum of 25%. Interest also compounds daily based on the federal short-term rate plus 3%. If the IRS determines that a taxpayer willfully failed to report transactions, it may impose accuracy-related penalties of 20% of the underpaid tax. In extreme cases involving fraud, civil penalties can reach 75% of the underpayment, and criminal charges may apply.