How Can I Enter a Wash Sale on Form 8949?
You may be asking yourself, When does a Wash Sale occur? The answer is simple: it comes about when someone discards or trades their assets or securities at a loss then proceeds to do either of the following within 30 days from the time of the said trade:
- Purchase considerably similar assets or securities
- Obtain considerably similar assets or securities in an entirely taxable trade
- Go in for a contract or the possibility of acquiring significantly similar stock or securities
- Obtain considerably similar assets or securities for either or both of their IRA and Roth IRA
Form 1099-B displays sales and purchases done with the same broker in a span of 30 days and leads to a loss. The amount is either shown on a brokerage declaration having the adjustment code “W” or in Box 1g of the Form “Wash Sale loss disallowed”. This transaction will not be added to the aggregate when Form 1099-B is aggregated in a tax return. In such a case you will have to enter the transaction separately.
The following are other ways in which wash sales may occur:
- When the taxpayer trades the same assets with various brokers in the 30 day span
- When the taxpayer’s spouse trades the same assets within the 30 days
- When the taxpayer’s or their spouse’s company or one in their control trades the same assets
Despite being wash sales, the transactions above are not indicated as wash sales on Form 1099-B nor the statements of brokerage.
A trader of assets or securities is capable of deducting losses for transactions that would have been washed sales if they had been earned in the normal course of doing business or trading. In the event that a wash sale is non deductible, the rejected loss is included in the assets purchased later.
In the Taxx Savage ProWeb, wash sales are entered on Form 8949. To do so:
- Go to the Federal Section of a tax return
- Select Income
- Then select Capital Gains and Losses followed by Capital Gains and Loss Items
- Then fill the fields guided by their explanations below;
- +Add a Capital Gains Transaction - you can select a MFJ return for either or both the taxpayer and their spouse.
- Description of Property - Apply a similar description to the one on Form 1099-B
- Date Acquired - the date is entered in Box 1b if the report is made on Form 1099-B
- Date Sold - the date in Box 1c is applied if the report is on Form 1099-B
- Sales Price - enter the amount in Box 1d if it is reported on Form 1099-B
- Select cost basis type. There are three options to choose from;
- Box 12 Cost Basis Reported to the IRS - in case Box 12 (Post 2018) or Box 13 (2018 and before) is checked then select this option
- Box 12 Cost Basis NOT Reported to the IRS - in case Box 12 (Post 2018) or Box 13 (2018 and before) is not checked then select this option
- Form 1099-B Not Received - in case the transaction was not displayed on Form 1099-B. For instance, transaction either not reported anywhere or it is reported on Form 1099-B
- Cost - Apply the date in Box 1e if it is reported on Form 1099-B unless more adjustments are needed on the basis. For instance, when a prior wash sale has increased it.
- Adjustments - Manually select W and write the non-deductible loss in the fields provided for adjustments in the event that an adjustment code of “W” representing Wash Sale is included in the brokerage statement or an amount is entered on Form 1099-B Box 1g.
Once done with the transaction, click Continue to enter another capital gain or loss transaction or Click Save & Enter Another if you have nothing else to enter.
More Information:
IRS: Instructions for Schedule D
IRS: Instructions for Form 8949