Schedule D and Form 8949 Wash Sales Reporting

[syoung123]

Hello, I have two brokage accounts, one of them had over 100 sales with some wash sales.  I would like to find out how to report the capital gains for these sales on Form 8949 and schedule D.  I am making the entries manually instead of importing the 1099Bs from the brokage firms, so I prefer not to have to input each individual sale and have over 100 sales lines on Form 8949.  All these sales are transactions that the basis was reported to IRS (Form 8949 box A short term)

Brokage Account #1 (name “Merrill”) – No adjustments, so I can put the totals directly on Schedule D, and they won’t be on Form 8949?

Total of Short term gains - $5,000

Total of Long term gains – 2,000

Brokage Account #2 (name “TD”) – 3 short term gains are “wash sales” that I need to use Form 8949 to report the 3 wash sales adjustments.

Total of Short term gains including the wash sales on Form 1099B (Box A) - $4,000

3 short term gains that are “wash sales” (Box A, column f -W, column g – adjustment) – total to $300 ($100, $150, $50)

Total of Short term gains that did not have adjustments - $3,700 ($4,000 minus $300)

Long term gains - no adjustments - $1,000

On Form 8949, for Brokage Account #2 (TD), can I just list only the 3 wash sales with code “W” and “wash sale adjustment $” individually, and then group/combine the rest of the “non-wash sales” that don’t have adjustments (over 100 sales) into one line, so the total of these 4 entries on Form 8949 would match with Form 1099B from “TD” brokage firm?

For instance – Brokage Acct #2 (“TD”)

Form 8949 -

Box A “checked” – short term transactions with basis reported to IRS

Wash sale 1 – share # and description “stock name 1”, sale proceed = $100

Wash sale 2 – share # and description “stock name 2”, sale proceed = $150

Wash sale 3 – share # and description “stock name 3”, sale proceed = $50

Total of the rest of the sales that don’t have adjustments – description “brokage name TD”, there would not be any detail/data on number of shares, stock description, date acquired and date sold, sale proceed = $3,700 ($4,000 - $300 wash sale)

So there would be 4 lines on Form 8949 (3 wash sales and 1 total of non-wash sales).

Schedule D –

Part I (short term)

• Line 1a - $5,000 (short term gains from “Merrill” with no adjustments)
• Line 2a (Box A checked) - $4,000 (wash sales $300 and no-adjustment sale $3,700 from “TD”) – info transferred from Form 8949 indicated above.

Part II (long term)

• Line 8a - $3,000 (“Merrill” $2,000 and “TD” $1,000 with no adjustment needed)

Or, instead listing the sales that do not have adjustments ($3,700) as one line item under Box A on Form 8494, can just group the $3,700 with the $5,000 from “Merrill” on Schedule D line 1a to show a total of $8,700?  If I do this, Form 8949 would only have the 3 wash sales, and Schedule D line 1b would show $300.

My concerns are:

1. If I put the sales of $3,700 that do not have adjustments as one line on Form 8949, the total of 8949 would match with the 1099B form “TD”.  However, since I group all these sales into one line on Form 8949, I won’t have the data to enter “share of stock and company, date acquired and date sold” on Form 8949.  Also, I think TurboTax would allow me to enter “VARIOUS” on the “date acquired” field, but I have to enter a “date format” on the “date sold” field.
2. If I put the $3,700 directly on schedule D line 1a and don’t show it on Form 8949, I won’t have to worry about not able to enter “share of stock and company, date acquired and date sold” on Form 8949.  However, Form 8949 would only show the 3 wash sales, and without the non-wash sales, the total on Form 8949 would not match with the 1099B from “TD”
3. I am not sure how IRS would allow the various methods of entries that I asked above.

Also, I am using TurboTax software to do the tax, but I plan to file it as paper return.  When I file the paper return, do I need to attach any document for the capital gains to the paper return?  Either TurboTax or the 1040 instruction seems to indicate I need to attach the brokage statement to the paper tax return.

Please advise.  Thank you.

[RobertB4444]

Your groupings are all fine.  As long as all of your stock trades are listed as "covered (basis is reported to the IRS)" then everything that you are doing is perfect.  For covered trades the IRS already has all of your brokers' trade information and getting the bottom line to match is the key.  

"Various" is correct for the 'date acquired'.  In your case, for the date sold, enter the date of the final transaction in each series.

As long as the trades are all covered trades you do not need to include the broker statements when you mail in the return.  You can if you want but they don't want it or need it.

@syoung123 

[syoung123]

Thank you for your reply.  It looks that I can do the followings

Short term sales (one account has wash sales):

1.  For one brokerage account, enter each wash sale on Form 8949, then enter the wash sale total on Schedule D line 1b

2.  Subtract the total of the wash sales from the total of all the stock sales in this brokerage account to get the "non-wash sales" numbers, and put on Schedule D line 1a

3.  For the other brokerage account that do not have adjustments, combine the stock sale total of this account with the non-wash sale total of the account per #2 above and put on Schedule line 1a.

Long term sales - either account has no adjustments

4.  Combine the long term sales for both accounts and put on Schedule D line 8a.

Result -

Form 8949 - shows wash sales only

Scheule D

line 1 a - shows combined totals of one brokerage account (net of wash sales) and another brokerage account with no adjustments

line 1b - shows total of wash sales from 8949

line 8a - shows combined totals of two brokerage account that the long term sales do not have adjustments.

There is need to attach brokerage statement.

Just want to confirm. Thanks much.

[DianeW777]

It depends.  It's important to understand completely the wash sale rules.

Wash sales cannot be combined into section totals.  They should be entered individually so that you can track your cost basis and know when you are allowed to use the information on a final sale.

Wash Sale Rule Defined:

• A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
• It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
• The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.

Affect on Cost Basis:

• The loss that occurs on a wash sale is added to the cost basis of the shares purchased that created the wash sale.
• When all shares are sold and there is no repurchase, that increased cost basis will be used in full and used to determine gain or loss.

As long as you are tracking the wash sales and are not using them on the tax return when you are not allowed, then you can simply enter the same cost basis as the selling price. This will  reconcile your tax return with your Form 1099-B Proceeds which is what the IRS is comparing.

Be sure to keep good records so that you know when to add those losses for future sales. To complete the tax return for the IRS, when summarized transactions are entered, follow the steps below.

If you are e-filing your tax return (recommended), then mail your statements along with Form 8453 to: 

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

Wash Sale ends:

The wash sale disallowed is not added to the net gain/loss rather it is adjusted and suspended so that it does not affect the total gain or loss for any pending wash sales.  The rub is that the broker only knows when a wash sale occurs, not when a wash sale no longer exists. This can spill over between two tax years.  Likewise you can have a wash sale during a tax year, and then fully dispose of the stock in the same year which would eliminate the wash sale rule for the final sale of the same stock. 

It's up to you to know when you no longer have to consider the wash sale rule. 

Example: 

X bought 5 shares of ZZZ stock, at $5 per share, then sold it for $3 per share, however immediately before the original 3 shares were sold, X bought another 5 shares at $5.00 per share.  

     $25 for the first block of shares

       15 is the proceeds creating a $10 loss 

The $10 loss is now added to the cost of the new shares for an overall cost basis of $35.  

Once the second block of shares is sold (5 shares with cost basis of $30) without any repurchase with in the 60 day window (30 days before or 30 days after the sale), and if they are sold at a loss, then no wash sale exists on the sale, and a loss is allowed.

You do not have to enter 4000 transactions, you can combine the wash sales into one entry, once you decide the transactions that are still open. Then include your statement with the detail.

[DianeW777]

It depends.  It's important to understand completely the wash sale rules.

Wash sales cannot be combined into section totals.  They should be entered individually so that you can track your cost basis and know when you are allowed to use the information on a final sale.

Wash Sale Rule Defined:

• A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
• It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
• The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.

Affect on Cost Basis:

• The loss that occurs on a wash sale is added to the cost basis of the shares purchased that created the wash sale.
• When all shares are sold and there is no repurchase, that increased cost basis will be used in full and used to determine gain or loss.

As long as you are tracking the wash sales and are not using them on the tax return when you are not allowed, then you can simply enter the same cost basis as the selling price. This will  reconcile your tax return with your Form 1099-B Proceeds which is what the IRS is comparing.

Be sure to keep good records so that you know when to add those losses for future sales. To complete the tax return for the IRS, when summarized transactions are entered, follow the steps below.

If you are e-filing your tax return (recommended), then mail your statements along with Form 8453 to: 

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

Wash Sale ends:

The wash sale disallowed is not added to the net gain/loss rather it is adjusted and suspended so that it does not affect the total gain or loss for any pending wash sales.  The rub is that the broker only knows when a wash sale occurs, not when a wash sale no longer exists. This can spill over between two tax years.  Likewise you can have a wash sale during a tax year, and then fully dispose of the stock in the same year which would eliminate the wash sale rule for the final sale of the same stock. 

It's up to you to know when you no longer have to consider the wash sale rule. 

Example: 

X bought 5 shares of ZZZ stock, at $5 per share, then sold it for $3 per share, however immediately before the original 3 shares were sold, X bought another 5 shares at $5.00 per share.  

     $25 for the first block of shares

       15 is the proceeds creating a $10 loss 

The $10 loss is now added to the cost of the new shares for an overall cost basis of $35.  

Once the second block of shares is sold (5 shares with cost basis of $30) without any repurchase with in the 60 day window (30 days before or 30 days after the sale), and if they are sold at a loss, then no wash sale exists on the sale, and a loss is allowed.

You do not have to enter 4000 transactions, you can combine the wash sales into one entry, once you decide the transactions that are still open. Then include your statement with the detail.

@syoung123

[Edited: 03/02/2024 | 9:21 AM PST]

[fanfare]

"It's up to you to know when you no longer have to consider the wash sale rule. "

realizing your deduction later in the same year, does not absolve you of your reporting requirements for wash sales.

--

you only need to supply details of 1099-B covered transactions with adjustments that are not listed on your e-Filed Form 8949. and all non-covered transactions not listed there.

In other words, for active investors, generally this is a list of the Wash Sales.
You may supply details on your separate Form 8949, or other document with the same information and in the same manner as Form 8949.

If you have two pages (for example) of Wash Sales,
use Adobe Reader to print those two pages. That's all you have to mail to the IRS, given that those wash sales are not on your e-Filed form 8949 already.
(you might enter them manually if they are few in number.)

[that was your original idea.]

@syoung123 

[syoung123]

Hello, thank you all for your replies.  For the reply from “DianeW777” and “fanfare”, my questions are related to how to list all the stock sales, of which 5 are “wash sales” on form 8949 and schedule D.  Based on various replies from the TurboTax community, I plan to do the following.  Please confirm if I am correct.  I apologize for potentially repeating myself, but I want to make sure this is correct.  Thank you.

I have two brokerage accounts

Account #1 – short term sales have 5 “wash sales”; no adjustments (i.e., no wash sales) on all the long-term sales.

Account #2 – no adjustment on both short-term sales and long-term sales.

What I plan to do:

Account #1 –

1. List the 5 wash sales (with code W and adjustments on column f and g) individually on form 8949 with box A checked (short term covered), then the total of the wash sales is transferred to line 1b of Schedule D
2. Add the rest of the short-term sales together and combine with all the short-term sales in Account #2, and enter the total directly on line 1a of Schedule D (since these sales do not have adjustments)
3. Add all the long-term sales together and combine with all the long-term sales in Account #2, and enter the total directly on line 8a of Schedule D (since these sales do not have adjustments)

Account #2

1. Add all the short-term sales together and combine with the short-term sales that do not have adjustments in Acct #1, and enter the total directly on line 1a of Schedule D (see #2 above)
2. Add all the long-term sales together and combine with all the long-term sales in Account #1, and enter the total directly on line 8a of Schedule D (see #3 above)

The results are:

Form 8949 – 5 individual wash sales

Schedule D

Line 1a – total of “non-wash sales” in acct #1 and all the short-term sales in acct #2 as one line total

Line 1b – total of “wash sales” that match with the total on form 8949

Line 8a – total of all the long-term sales in Acct #1 and Acct #2 as one line total

No need to attach the brokerage 1099B pages that show the 5 wash sale lines (also TurboTax input did not say to attach the brokerage statement)

[RobertB4444 · Accepted solution]

This is exactly what you should do, your plan is perfect.  You are also correct that you do not need to submit your brokerage statements with the return or separately.

@syoung123 

[fanfare]

It would be very helpful if the broker listed wash sales together on a separate sheet with their subtotals.

rather than mixing all transactions by date.

complain to your broker.

[syoung123]

system limitation, brokerage stmt can only show list of all sales in alpha order.