Changes to the 1040 Schedule D Will Make the 2014 Filing Season a Bit Easier for Tax Filers

In 2011 the IRS introduced Form 8949, and Schedule D became a summary document for the overall gain or loss of transactions reported on Form 8949.  This became a burden to taxpayers and practitioners who were reporting hundreds of thousands of these transactions each year.  Before 2013, the IRS provided two exceptions for the line-by-line reporting requirement on Form 8949: (1) taxpayers could attach a separate statement containing the transaction details, and (2) corporations, exempt organizations, and partnerships with large numbers of transactions could omit the detail and indicate “Available upon request.”  

If the return was electronically filed but the taxpayer chose not to report each transaction on a separate row on the electronic return, the taxpayer was required to (a) include Form 8949 as a PDF attachment to the return or (b) attach Form 8949 to Form 8453 (or the appropriate form in the Form 8453 series) and mail the forms to the IRS.

For the 2014 filing season, direct reporting on Schedule D is allowed.  Taxpayers will be able to combine qualifying transactions and report the totals directly on Schedule D.  If they choose to report in this manner, they do not need to include these transactions on Form 8949.

Specifically, the Form 1040, Schedule D instructions explain that a taxpayer may aggregate totals and report them directly on either line 1a (for short-term transactions) or line 8a (for long-term transactions) of Schedule D for transactions (other than sales of collectibles) where:

• The taxpayer received a Form 1099-B (or substitute statement) that shows basis was reported to the IRS and does not show a nondeductible wash sale loss in box 5; and

• The taxpayer does not need to make any adjustments to the basis or type of gain or loss (short-term or long-term) reported on Form 1099-B (or substitute statement), or to the taxpayer’s gain or loss.

Form 8949 is no longer required for these qualifying transactions.

Tax preparers should also be aware of two additional changes impacting Schedule D and Form 8949 filing:

• (For estates and trusts) Many transactions that, in previous years, would have been reported by estates and trusts on Schedule D or Schedule D-1 must now be reported on Form 8949 if they have to be reported on a 2013 form.

• (For electing large partnerships) For 2013, electing large partnerships report their share of gain or loss from pass-through entities on Schedule D, rather than 8949, as in prior years.