What Is Short-Term Covered vs. Uncovered on Form 8949?

On Form 8949, a short-term covered transaction is a sale of a security you held one year or less where your broker reported the cost basis to the IRS; a short-term uncovered transaction is the same kind of sale, but with no basis reported by the broker. The label controls which box you check at the top of Part I and how much work you personally have to do to fill in the basis. It does not change your tax rate. Short-term gains are taxed as ordinary income either way.¹

What Makes a Security Covered

Whether a security is covered has nothing to do with how long you held it. It depends on whether federal law required your broker to track and report the cost basis. The Energy Improvement and Extension Act of 2008 amended Internal Revenue Code Section 6045 to impose that duty, and the rule phased in by asset type.²

Stocks other than mutual fund and DRIP shares: covered if acquired on or after January 1, 2011.
Mutual fund shares and dividend reinvestment plan shares: covered if acquired on or after January 1, 2012.
Bonds, options, and other specified securities: covered if acquired on or after January 1, 2014.

The equity and mutual fund effective dates come from the federal regulations on broker basis reporting.³ Anything purchased before the applicable date is uncovered. For uncovered lots, the broker reports the sale proceeds only, so on paper the IRS sees no basis and the entire sale amount looks taxable until you supply the missing figure.

To confirm you’re actually in the short-term category, count from the day after you bought the asset through the day you sold it. Held for one year or less lands in Part I of Form 8949. Held longer than a year is long-term and belongs in Part II. Selling on the anniversary date is still short-term; one more day makes it long-term.

Which Box You Check

Form 8949 Part I gives you three boxes for short-term transactions, and each corresponds to a code your broker prints on your 1099-B.⁴

Box A: short-term, basis reported to the IRS (covered). 1099-B shows Code A.
Box B: short-term, basis not reported to the IRS (uncovered). 1099-B shows Code B.
Box C: short-term, no 1099-B or 1099-DA received at all. This covers situations like a taxable nondividend distribution on stock held short-term or a capital gain calculated under the NAV method for money market fund shares.⁵

If you have 1099-Bs from more than one broker, or a mix of covered and uncovered lots at the same broker, expect to file more than one Form 8949. Each box category needs its own form or section. That’s normal and doesn’t flag anything unusual on your return.

One boundary worth naming: if your broker couldn’t determine the holding period, the 1099-B carries Code X and you have to work out the classification yourself before you know which box applies.

How to Report a Box B Uncovered Transaction

Uncovered securities put the basis calculation squarely on you. Pull the original purchase price from trade confirmations, old brokerage statements, or archived account records, and confirm the purchase date so you know the holding period really is short-term.

Enter your correct cost basis in column (e) of Form 8949. If your 1099-B shows a basis figure but also indicates that basis wasn’t reported to the IRS, you still enter your own correct number in column (e) and put zero in the adjustment column (g).⁶ Leaving basis blank tells the IRS computer the whole sale is gain, and a notice for the extra tax follows.

If you bought the same security in multiple lots and can’t identify which shares you sold, the default is first-in, first-out: the oldest shares are treated as sold first. Using specific identification instead requires records showing you designated particular shares at the time of the sale.⁷

Adjustments That Change Your Basis

The number you enter in column (e) is not always what you paid. Several events shift it, and for uncovered lots your broker generally isn’t tracking them:

Wash sales. If you sold at a loss and bought a substantially identical security within 30 days before or after the sale (a 61-day window), the loss is disallowed and added to the replacement shares’ basis.⁸
Stock splits. A 2-for-1 split cuts per-share basis in half while doubling your share count; total basis is unchanged.
Corporate mergers or reorganizations. Basis in the old shares typically carries over to the new shares, sometimes with an allocation if you received cash alongside stock.

Adjustment Codes in Column (f)

Column (f) uses letter codes to explain any difference between what your broker reported and what you’re reporting.⁵ The ones that come up most often on uncovered short-term lots are Code B, when the basis shown on your 1099-B is wrong (enter the correct basis in column (e) and the adjustment in column (g)), and Code W, when a wash sale disallows part of the loss (enter the disallowed portion as a positive number in column (g)). Multiple codes go in the same column (f) cell in alphabetical order with no spaces. If no adjustment is needed, columns (f) and (g) stay blank.

The Schedule D Shortcut for Clean Box A Totals

You may not need Form 8949 at all for your covered short-term trades. If every 1099-B shows the basis was reported to the IRS, no adjustments appear in boxes 1f or 1g, the “Ordinary” box isn’t checked, and you have no corrections to make, you can report those totals directly on Schedule D line 1a without listing each transaction on Form 8949.⁶ The shortcut disappears the moment you need to correct a basis, fix a holding period, or report a wash sale. Uncovered Box B trades never qualify for it.

How Totals Flow to Schedule D

Subtotals from each box category on Form 8949 carry over to Schedule D: Box A to line 1a or 1b, Box B to line 2, Box C to line 3.⁹ Schedule D nets the short-term figures, combines them with long-term results, and produces the final capital gain or loss for your Form 1040. Short-term gains that survive that netting are taxed at your ordinary income rate rather than the preferential long-term rates.¹

Digital Assets Use Different Boxes

Crypto and other digital assets do not go in Box A, B, or C. Starting with tax year 2025 returns, Form 8949 adds six new boxes for digital asset transactions reported on Form 1099-DA. Short-term digital asset sales use Box G (basis reported), Box H (basis not reported), or Box I (no 1099-DA received).⁶ Brokers began reporting digital asset proceeds on Form 1099-DA for transactions on or after January 1, 2025, and are required to report cost basis for transactions on or after January 1, 2026.¹⁰

What Happens If You Get the Box Wrong

Checking Box A when you should have checked Box B, or vice versa, typically produces an IRS notice rather than a penalty, because the total gain or loss is the same and the tax owed doesn’t change. The IRS matches your entries against broker filings and asks you to reconcile the mismatch.

The costly mistake is a wrong basis, not a wrong box. If the IRS finds you underpaid because the basis you reported was inaccurate, the accuracy-related penalty runs 20% of the underpayment.¹¹ A failure-to-pay penalty of 0.5% per month also accrues on unpaid tax from the due date until you pay in full, capped at 25%, with interest compounding on the balance.¹²

Because uncovered basis rests entirely on your own documentation, keep trade confirmations and purchase records for at least three years after filing, which is the standard IRS audit window. Holding those records longer is prudent for older uncovered lots where reconstruction would be difficult.

1
Internal Revenue Service. Topic no. 409, Capital Gains and Losses
2
Office of the Law Revision Counsel. 26 U.S.C. 1012 – Basis of Property-Cost
3
Internal Revenue Service. Basis Reporting by Securities Brokers and Basis Determination for Stock
4
Internal Revenue Service. Instructions for Form 1099-B (2026)
5
Internal Revenue Service. Instructions for Form 8949
6
Internal Revenue Service. Instructions for Form 8949
7
Internal Revenue Service. Basis of Assets
8
Office of the Law Revision Counsel. 26 U.S. Code 1091 – Loss From Wash Sales of Stock or Securities
9
Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets
10
Internal Revenue Service. Final Regulations and Related IRS Guidance for Reporting by Brokers on Sales and Exchanges of Digital Assets
11
Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments
12
Internal Revenue Service. IRS Notices and Bills, Penalties and Interest Charges