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Here is the breakdown of how to handle Form 8949 and that red exclamation point.

1. Reporting the Wash Sale

You are correct on the mechanics. If you have a disallowed loss due to a wash sale:

1. Column (f): Enter the code W.
2. Column (g): Enter the amount of the disallowed loss as a positive number.
3. The Result: Since Column (h) is calculated as $(Cost - Proceeds) + Adjustment$, entering the loss amount as a positive number in Column (g) effectively zeros out the loss (or reduces it), ensuring you aren't claiming a deduction you aren't allowed to take yet.

2. Is an Explanation Required?

1. For a standard wash sale reported by your broker (which is usually the case for stocks), no separate written explanation is required.
2. The "W" code itself acts as the explanation. The IRS knows exactly what that code means. You only need to provide additional documentation if you are disputing the broker's math or if you have a very complex scenario involving wash sales across different accounts that weren't captured on your 1099-B.

3. The Red Exclamation Point

 It usually appears because:

1. Manual Entry: You might have typed the "W" but left a related field blank.
2. Review Flag: The software wants you to "Check Entry" to confirm you didn't accidentally trigger a wash sale by mistake.
3. How to remove it: Click on the "Review" or "Errors" tab in your software. It will take you to the specific line. Usually, once you verify the entry or click "Continue" through the guided questions, the software clears the flag. If it stays red, you may be missing the date acquired or date sold, which are mandatory for electronic filing.

4. Electronic Filing Concerns

1. A wash sale will not prevent you from filing electronically, provided the form is filled out completely.
2. The IRS receives millions of 8949s with "W" codes every year. As long as your totals from Form 8949 flow correctly onto your Schedule D, your return is electronically "clean."

Quick Checklist for E-Filing:

1. Ensure Box A, B, or C is checked at the top of Form 8949 (indicating whether the basis was reported to the IRS).
2. Verify that the Description of Property (Column a) is filled in.
3. Check that the Adjustment amount in Column (g) matches the "Wash sale loss disallowed" amount on your 1099-B.