More than half (56%) of Americans own cryptocurrency or have owned it in the past. What’s more, recent surveys suggest that about 46.5 million more Americans will join in on the trend during the next year due to incoming stock market changes and instability.
If you’re currently trading in cryptocurrencies or have in the past, then you need to know about Form 8949 before you file your taxes. This important tax form isn’t exclusively used for cryptocurrency trading, though. It’s also used for reporting all sales and exchanges of capital assets.
Are you currently wondering if you’ll need to fill out IRS form 8949? Learn everything you need to know below.
What Is Form 8949?
IRS Form 8949 gives taxpayers a space to record the sale and/or exchange of their capital assets. This form should be filed along with a taxpayer’s income taxes. In general, it reports the following types of capital assets or other dispositions:
- Any sales or exchanges of a capital asset that wasn’t reported on another form
- Non-business bad debts
- Any gains from conversions of capital assets
- The disposition of interests in a QOF
- Worthlessness of a security
Depending on your situation, you may need to complete even more than one form. If you have multiple transactions, you will need to fill out multiple forms.
Who Should Use IRS Form 8949?
Now that you have a basic idea of what form 8949 is used for, you’re likely wondering—do I need to file form 8949?
In general, you may want to file this form if you received:
- Form 1099-S
- Form 1099-B
- Proceeds from broker and barter exchange transactions
- Proceeds from real estate transactions
- Proceeds from the sale of stock, land, or artwork
- Proceeds or losses from cryptocurrency dealings
Before filing your form, take care to closely analyze your form 1099s. Sometimes, all of your transactions will be reported to the IRS on all the forms. If that’s the case, you won’t need to fill out an additional form 8949.
You’ll only need to fill out the form if there is a discrepancy between your 1099s and the amount you’ll be reporting to the IRS.
Cryptocurrency and Form 8949
One new area for many taxpayers involves cryptocurrency. If you’ve made the move to start trading, buying, and selling cryptocurrency, then you also need to know the basics of cryptocurrency and bitcoin taxes.
In a nutshell, you’ll need to take note of any capital gains or losses throughout the year as you move your cryptocurrency assets around. These movements, gains, or losses will all be reported using Form 8949. Every time you make a cryptocurrency transaction, it’s best to document the fair market value of the currencies at the times of your transactions.
How To Fill Out Form 8949
If you need to fill out Form 8949, then the good news is that our Form 8949 instructions will help simplify the process. To obtain the right document, visit www.irs.gov/form8949. You can download the correct form and either print it off or fill it out on the IRS site.
First, fill out your name and put your Social Security number in the appropriate box.
Next, you’ll want to select only one box for either short-term transactions reported on a form 1099-B that was reported to the IRS, short-term transactions on a Form 1099-B that wasn’t reported to the IRS, or short-term transactions not reported to you on any Form 1099-B. Rather than checking off multiple boxes if they apply, you’ll fill out one Form 8949 for all transactions under each box category.
From there, fill out the chart with the details of each applicable transaction. You’ll list the property, the date you acquired and sold it, the proceeds, costs, amount of adjustment, and gains or losses.
Repeat the process and fill out as many forms as it takes to list out everything.
Remember, if you and your spouse are filing jointly, then you’ll also need to include forms that account for all your spouse’s transactions, too.
Do You Need More Help with Form 8949?
A Form 8949 will help reconcile any differences between the amount of income you end up reporting to the IRS and the amounts reported on Forms 1099-B or 1099-S. Individuals who have sold, exchanged, or traded capital assets would best be served by filling out this important IRS form when filing taxes during the next tax season.
While we’ve provided a short guide on how to fill out your Form 8949, we also understand how challenging taxes and tax forms can be for the average taxpayer. Tax terminology is complex and confusing, and filling out tax forms isn’t a simple process.
If you need more help with Form 8949 or you have specific questions about other tax issues, then we can help. Reach out to us by leaving your information on our contact form or call us at (800) 264-1869. Our tax experts can help you feel confident that you’re filling out the right tax forms with the correct data. We can also help you get back in good standing with the IRS if you’ve recently encountered some tax trouble.