Form 1099-B, Form 8949, & Schedule D: Demystify The New IRS Forms & Reporting In Our Tax Center

For people who sold shares in 2011, major changes in tax reporting and filing are taking effect this tax season. At myStockOptions.com, we have updated our entire Tax Center for all of these changes and the new IRS forms. Our popular resources include clearly annotated diagrams of Form 8949 and Schedule D for over 20 different reporting situations involving equity comp. For a quick rundown of what's new or a summary of the technical details, listen to our special podcasts for this tax-return season.

New Reporting Requirements On Form 1099-B

Sent by brokers before mid-February, IRS Form 1099-B, or the broker's equivalent statement, includes more information than it used to. Starting this tax season, it now shows not only the gross proceeds from stock sales but also their cost basis (also called the "tax basis"), the date when the shares were acquired, and whether gains or losses were short-term or long-term.

For people who sold shares acquired through equity compensation, these stock sales carry an extra twist in their cost basis. In fact, cost-basis reporting is now more complex, confusing, and vulnerable to errors. If you are not aware of the reporting rules, the resulting confusion may lead you to overpay taxes. A thorough new article and FAQ at myStockOptions.com explain the background, how to understand Form 1099-B if you sold shares from stock compensation or an ESPP, and how to avoid mistakes with the cost basis that can lead to overpayment of taxes.

Schedule D's New Best Friend: IRS Form 8949

The changes in the 1099-B information required a complete revamp of the tax-return forms used to report stock sales. To report a sale of shares on your tax return, you must now complete the new IRS Form 8949 along with Schedule D, which has significantly changed upon the introduction of Form 8949.

The new Form 8949 is where you list the details of each stock sale, using the information on Form 1099-B, while Schedule D now simply aggregates the column totals from this form to report your total long-term and short-term capital gains and losses. However, the cost-basis information in Box 3 of Form 1099-B may be too low, or the box may be blank. This is because the new rules for cost-basis reporting are mandatory only for stock acquired in 2011 and later, and brokers will not be required to include the compensation part of the basis until 2013. (See our article on this topic and a new FAQ on the compensation part of the tax basis.) Additionally, no basis is reported for restricted stock and RSUs.

Sound confusing? It is. Fortunately, myStockOptions.com is here to help. Our special section Reporting Company Stock Sales presents FAQs with annotated diagrams of Form 8949 and Schedule D. Each FAQ explains and illustrates a different reporting situation involving stock options, restricted stock, restricted stock units, performance shares, employee stock purchase plans, or stock appreciation rights. Clear instructions and diagrams show how to complete the forms, whether the cost-basis information in Box 3 of Form 1099-B is accurate, too low, or omitted.

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