bypass8949

[mikeraker]

I am using the 2023 desktop version of TurboTax Deluxe. I have reported both short-term capital gains (with wash sale adjustments for some but not all of my transactions) and long-term capital gains (with no adjustments) using the summary method. (I will file Form 8949 with the IRS separately after e-filing.) Both the short- and long-term entries show up on Schedule D and on the Capital Asset Sale Worksheet (#1) . But only the summary of the short-term sales show up on the TT Form 8949 - presumably because of the wash sales. (On the worksheet, on the line for the long-term gains, there's an entry that reads "BYPASS8949.")

It's not clear to me why TT is producing a Form 8949 at all, given that I am using the summary method of reporting. But if it is going to send the IRS a Form 8949, why doesn't it include both the short- and long-term gains?

I just realized that TT did the same thing in 2020 when I had the same situation with short-term gains with adjustments and long-term gains without.

Thanks.

[rjs]

TurboTax produces Form 8949 for the short-term sales because Form 8949 is required when there are adjustments. There is no way to show adjustments except by using Form 8949.

What you have to send to the IRS is not just Form 8949. You have to send the details of all the individual sales, not just a summary. You can do that by entering each individual sale on Form 8949, or by sending a statement containing the same information as Form 8949 in a similar format. Most people satisfy this requirement by sending a copy of the 1099-B section of the brokerage statement that lists all the individual sales.

Even if TurboTax put the summary of your long-term sales on Form 8949, you would still have to send the detailed listing of the individual sales to the IRS. What the IRS wants is not Form 8949. They want the details of the individual sales, either on your tax return (on Form 8949) or in a separate statement.

[fanfare]

@rjs 

@mikeraker 
Detail Reporting Exception: if you summarize Category A or Category D, Form 8949 is not needed for transactions without adjustments. No mailing is necessary. No attachment is necessary.

[fanfare]

When details are required you can use Form 8949 to supply the details and mail it in to the IRS.

[mikeraker]

I appreciate the replies.

My initial post may not have been clear. I understand that in my situation, a detailed Form 8949 is required for the short term gains. I plan to submit that via mail (along with Form 8453) if I e-file.  But what's confusing is that if I e-file, I will be sending the IRS what appears to be an incomplete 8949, even if, given Exception 1 in the instructions, it is technically complete. After all, it contains only the information regarding the transactions involving the short term gain. But if the IRS is requiring an 8949 only for my short term transactions, I get it.

But my other concern is that the description of the property for my short term sales says, "[Broker name] - see attached statement." There is and will be no attached statement. I know that some users include the required detailed information regarding their trades on the 8949 when they e-file. But I am mailing the 8949 (using a report I am generating using my trade tracking software - which is more accurate than the 1099-B). When users are mailing their 8949, TT should allow them to indicate that and then show that on the 8949. For example, the description of the property could say, "XXX Brokerage - statement to be mailed separately." I don't know if that matters to the IRS, but it would certainly be clearer for the taxpayer.

[rjs]

TurboTax is following the IRS instructions and procedures. It's fine the way it is. Thousands, maybe millions, of people do it this way every year. The IRS has a form, Form 8453, specifically for mailing attachments separately when you e-file. TurboTax will create Form 8453 for you and you attach your detailed statement to it. The IRS understands what's going on and will treat the statement as if it was attached to your tax return.

When you make summary entries on Form 8949, the IRS instructions say "Enter the name of the broker followed by the words 'see attached statement' in column (a)." TurboTax is following the IRS instructions. They are not going to change the wording that IRS says to use.

[mikeraker]

C'mon - "millions of people"?? Beyond that, you missed my point - which related to making things clearer for the TT user. See the last sentence in my follow-up post. ("I don't know if that matters to the IRS, but it would certainly be clearer for the taxpayer.")

The instructions that you refer to do not apply to the situation I've described. The language that you quoted is indeed in the Instructions for Form 8949, but they apply to a situation in which the taxpayer includes an attachment. When a taxpayer uses TT in the way that I've described (e-filing, followed by mailing the detailed Form 8949), there IS no attachment accompanying the e-filed summary version of the form. (And yes, I am familiar with Form 8453.)