. I worked all day on my taxes today. I like to get it done as early as possible so it's not hanging over my head.
It went relatively smoothly until I got to Line 7A Capital gain or loss. I had the cap gains reported on my Form 1099-DIV, which happens every year, but last year I also took about $13K from taxable brokerage funds, and for the life of me I couldn't figure out whether I needed to File Schedule D, Form 8949 or both. Each time I looked at different instructions on one form or the other they seemed to say something a little different. In the end, I chose to file Form 8949 because the Form 1099-B I got from my brokerage said "Long-term transactions for which basis is reported to the IRS - report on Form 8949." What confused me was that on the same form under the Gain or loss column, it says in parentheses (not reported to the IRS).
And I decided to also File Schedule D because the 1040 instructions said if you sold a capital asset like a stock, you must file both Schedule D and Form 8949, with 2 exceptions. It's the 2 exceptions I kept tripping over til my brain was fried, but it seemed to me that neither exception applied to me.
I decided to see if itemizing on Schedule A would be better than taking the standard $15K deduction. My itemized deductions, even with my high property taxes, came to $9,500, so not really close. I reported a $10K Roth conversion and made sure to claim the new senior deduction as well as the car loan interest deduction.
In the end, it appears I'll get a refund of about $750. And my total taxable income came to just about $150 more than the top of the 12% bracket; this was my goal, to stay in the 12% bracket, so job well done.
I will scan everything tomorrow, I guess, and at least check my math. I plan to file on paper through snail mail rather than use a free tax service. I'll mail it certified. I don't like using them; the one time I tried, I didn't like how they ask you questions and just automate stuff for you. I like to read the IRS instructions for myself. Call me a masochist.
February 2nd, 2026 at 01:20 am 1769995202
Basically tax forms work from back to front. The first two pages of the 1040 is a SUMMARY of all the income, adjustments, deductions, credits, and payments.
But that summary is pulling from the other forms and schedules in the return. Like you enter your possible itemized deductions on the Schedule A and then the bottom line number appears on line 12e of the 1040. Or you enter your interest and dividends and the detail appears on Schedule B, with the bottom line numbers on lines 2a and 2b and 3a and 3b.
Capital gains are a little more complex because of the way that the rules changed about basis reporting starting in about 2010, which is when I started doing taxes. Back then, brokerages were not *required* to report cost basis and you had to dig and make phone calls to get it if the client had not kept good records. But that's when they started instituting rules requiring the brokerages to report, with the rules first applying to individual stocks and then later to mutual funds. So when it says "cost basis not required," that's referring to older stock purchases that were made before the basis reporting rules went into effect. It's just a technicality at this point, but it does add complexity to reporting of capital gains, which is why the form 8949 was introduced.
Before then, there was just the Schedule D. Now there is the Form 8949 together with the Schedule D. If you are filing the 8949, you are also ALWAYS filing Schedule D. It's not either/or. Schedule D can be filed on its own in certain cases, for example, if your only capital gains are capital gain distributions from mutual funds, but the 8949 cannot be filed without the Schedule D. It doesn't hurt to also complete the form 8949 in addition if you have had a stock sale.
The form 8949 has 6 sections, 3 for short-term, 3 for long-term. The first one of these is basis WAS reported to the IRS (so more recent purchases), the second is basis was NOT reported to the IRS (older purchases), and the third is for when the capital gain isn't being reported on a 1099-B, for example, sale of a vacation home.
All the items from the 6 sections of the 8949 are then aggregated onto Schedule D, which then feeds to line 7a of the 1040.
Tax returns are essentially constructed from the back (detail) to the front (form 1040 itself), but read from front to back.
By choosing the file on paper you are ensuring a pretty long delay for your refund. Paper is on the way out when it comes to tax filing and paying and it's gone for receiving refunds.
February 2nd, 2026 at 01:33 pm 1770039200
I liken doing a tax return to teasing out the solution to a Rubik's Cube: You have to go down some rabbit holes in what may seem a very serpentine way to get where you want to go. Ahh, the worksheets. The schedules. Eventually, they'll lead the way home. No shortcuts.
So with the 2010 rule change, does that mean I can shred old mutual fund statements saved to show cost basis? I have never referred to them.
At the risk of absolutely boring readers here to death, the reason I thought you could just file 8949 without D is from this perfectly (un)clear excerpt from Line 7A instructions: "Exception 2. You must file Schedule D but generally don’t have to file Form 8949 if Exception 1 doesn’t apply, you aren’t deferring any capital gain by investing in a qualified opportunity fund or terminating deferral from an investment in a qualified opportunity fund, and your only capital gains and losses are:
• Capital gain distributions;
• A capital loss carryover from 2024;
• A gain from Form 2439 or 6252 or Part I of Form 4797;
• A gain or loss from Form 4684, 6781, or 8824;
• A gain or loss from a partnership, S corporation, estate, or trust; or
• Gains and losses from transactions for which you received a Form 1099-B or 1099-DA (or substitute statement) that shows basis was reported to the IRS, the QOF box in box 3 of Form
1099-B or box 3b of Form 1099-DA isn’t checked, and you don’t need to make any adjustments in column (g) of Form 8949 or enter any codes in column (f) of Form 8949."
I just think the American tax system, more specifically, the complexities of tax returns, are in dire need of an overhaul. It shouldn't be so complicated. The majority of taxpayers have to pay someone to do it, and that shouldn't be. I wonder if Mum can tell us if it's the same in Australia.
February 2nd, 2026 at 02:02 pm 1770040945
-stock shares acquired after January 1, 2011
-mutual fund shares acquired after January 1, 2012, and
-bonds acquired after January 1, 2014.
But if you own shares of any of the above that were acquired before those dates in your taxable account, you should keep the basis information. And remember that basis includes any dividends or capital gain distributions that were reinvested.
And any old information for your IRA can be shredded unless you made after-tax contributions to your IRA.
And yes, IRS language can be hard to parse. That paragraph is saying you must file Schedule D but you don't necessarily need to file the 8949.
Now I'm feeling old--or at least experienced as a tax pro, since I remember when the form 8949 was introduced. It wasn't in existence for my first couple of years of tax preparation, the 2009 and 2010 tax seasons. It was first used for the 2011 tax reporting season.
Yes, the system is serpentine--but it also belies a lot of political arguments and that is just one of the reasons I find it so fascinating. Heather Cox Richardson often mentions that she is fascinated with tax law and I would so enjoy having a conversation with her about that.
February 2nd, 2026 at 02:14 pm 1770041683
February 3rd, 2026 at 05:04 pm 1770138273