Last year saw the addition of a new form to partnership tax returns for reporting details of capital gains income. This was Form 8949. This year Form 8949 has changed slightly and what goes on the form can be a little different. Form 8949 is used to report proceeds from sales and the cost basis of shares sold in individual transactions. Also, if necessary, the cost basis reported to the IRS by your broker is reported on this form as well as any adjustments (differences) between the club records and your broker’s.
There were check boxes to indicate whether the cost basis on the 1099 was A) reported to the IRS, B) not reported to the IRS or C) the transaction did not appear on any 1099. Form 8949 is essentially unchanged. The check boxes are labeled A, B, C for short-term gains but D, E and F for long-term gains. A bigger change is that transactions where your records and the broker’s match exactly do not need to be entered on Form 8949. Instead, the aggregate proceeds, cost basis and gain can be reported directly on Schedule D. Short-term gains and long-term gains with no adjustments are reported separately on Schedule D.
Next is the difference in Schedule D. Part I, for short-term gains, has a Line 1a and a Line 1b. Line 1a is to report the aggregate numbers for those transactions for which your transaction records match the broker’s information. Line 1b is to report the same summary information but for transactions where your records do not exactly match the broker’s information reported to the IRS. This is taken from Form 8949 Part I. Part II, for long-term gains, has the same set up. The line numbers 8a and 8b serve the same reporting purposes as lines 1a and 1b do for short-term gains.
Another change is the reporting of cost basis information for mutual fund transactions by your broker. It’s now required to send this information to the IRS if the mutual fund was acquired on or after Jan. 1, 2012. Clubs need to report the broker’s information on their tax return if their 1099 indicates information from a mutual fund transaction was sent to the IRS. The tax printer software will have a place to enter this information. Unlike with stocks, average cost basis is allowed for mutual funds. Clubs should check their accounting records and compare this with their broker’s method to ensure each is using the same method of recording cost basis for mutual funds held by the club.