You’ll receive a Form 1099-B from your broker whenever you sell investment securities. Form 1099-B lists the pertinent information about your sales, including date, description and proceeds, and if known, your cost basis. Investment gains and losses affect your taxes, so you’ll have to report all the required information about your investments when you file.

Form 1099-B

Investment securities include stocks, bonds, mutual funds, and others, and the sale of these will generate a 1099-B at the end of the year. Every sale gets its own 1099-B. If you make a variety of sales at a single institution, you’ll get a consolidated 1099-B with all your sales. For your taxes, you’ll need the amount you paid originally for the investment along with the proceeds you made from the sales. To record your transactions correctly, the 1099-B includes your institutions federal identification number, your tax ID number, and the security symbol and number of shares if it applies.

Form 8949

You need to transfer the information from your 1099-B to a Form 8949. Form 8949 is used to document sales and dispositions of capital assets, including stocks, bonds, and mutual funds. You’ll be required to divide your trades into long-term and short term. Short-term are held for less than one year, while any assets over a year in ownership are known as long-term trades. On the Form 8949, you’ll record a description of the asset, the date originally purchased and sold, cost basis, and proceeds from the sale. The final column is used to tally your gain or loss.

Schedule D

Once you’ve transferred the information from the 1099-B, you’ll be able to determine your initial capital gains or losses. That information is then recorded on a Schedule D, which will calculate your final loss or gain in accordance with other factors. So, if you have a carry-over loss from another tax year, you’d enter it on the Schedule D, and it will affect your total gain or loss as originally stated on the Form 8949. You’ll need to input capital gains distributions on the Schedule D as well. Simply following the instructions as per the Schedule D will allow you to calculate the appropriate tax rate applicable to your gains prior to transferring it to your Form 1040.

Taxation

Short term gains from your 1099-B will be included as regular income on your tax return. You’ll pay your taxes on those gains as if they were regular income. Long-term gains are generally subject to a lower tax rate, sometimes as low as zero percent. Losses can reduce your gains, decreasing ordinary income by up to $3,000 per year. The IRS knows if you don’t accurately report the information from your 1099-B, as your financial institution sends a copy to the government as well.