Employer stock sales on both W-2 and 1099 are double counted and taxed

Forum|Forum|7 years ago
May 31, 2019
3 replies
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On my W-2, my employer reported income from the sale of stock options, non-qualified stock, and restricted stock units. Separately, I received 1099s and entered information for the these sales into TurboTax. Now my income looks higher that it really is and I am getting taxed on these sales twice. How do I fix this while still following instructions?

TurboTax Premier Windows

Best answer by TomYoung

ANSWER IS CORRECT FROM AN INCOME TAX STANDPOINT BUT STEP BY STEP INSTRUCTIONS ARE ONLY APPLICABLE TO THE 2014 PROGRAM AS THE DEVELOPERS CHANGE THE INTERVIEW FLOW EVERY SINGLE YEAR.

The problem is that you are using the WRONG BASIS to report the sale. That's why you are getting a "double income" effect.

When you sell stock acquired via an employer stock incentive program your basis for the sale is the sum of:

Any amount you paid to receive the stock, which might be $0, plus
Compensation income created either by the acquisition or sale of the stock

If the sale is "covered" - broker reports basis to IRS - then in 2014 brokers are only required to report the "purchase price" element of the sale. The basis reported omits the "compensation" element of the sale and therefore the "compensation" gets reported twice: once via the W-2 and then again as profit on the sale of the stock.

Clearly the "fix" here is to add back the compensation element to the basis of the stock being sold. Of course if the sale is not for ALL of the stock received under an employer stock incentive plan award, you then you need to convert the compensation element to a "per-share" figure which you use in reporting the sale.

If the 1099-B is reporting the basis to the IRS and is not using the correct basis, (maybe only the amount you paid for the stock), then enter the 1099-B as it reads but then click on the "Add More Details" box (or maybe "Edit Details"), and the "Start" button, (or maybe "Edit.)

On the next page select the first option which is "I need to add or fix info about this sale that's on my Form 1099-B." Tell TurboTax that the 1099-B is reporting the wrong basis. That's the interview you want and that's where you can fix things. Tell TurboTax that the 1099-B is reporting the wrong basis and then enter the "missing" compensation to get to the correct basis.

TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.

Tom Young

T

TomYoungAnswer

Employee

ANSWER IS CORRECT FROM AN INCOME TAX STANDPOINT BUT STEP BY STEP INSTRUCTIONS ARE ONLY APPLICABLE TO THE 2014 PROGRAM AS THE DEVELOPERS CHANGE THE INTERVIEW FLOW EVERY SINGLE YEAR.

The problem is that you are using the WRONG BASIS to report the sale. That's why you are getting a "double income" effect.

When you sell stock acquired via an employer stock incentive program your basis for the sale is the sum of:

Any amount you paid to receive the stock, which might be $0, plus
Compensation income created either by the acquisition or sale of the stock

If the sale is "covered" - broker reports basis to IRS - then in 2014 brokers are only required to report the "purchase price" element of the sale. The basis reported omits the "compensation" element of the sale and therefore the "compensation" gets reported twice: once via the W-2 and then again as profit on the sale of the stock.

Clearly the "fix" here is to add back the compensation element to the basis of the stock being sold. Of course if the sale is not for ALL of the stock received under an employer stock incentive plan award, you then you need to convert the compensation element to a "per-share" figure which you use in reporting the sale.

If the 1099-B is reporting the basis to the IRS and is not using the correct basis, (maybe only the amount you paid for the stock), then enter the 1099-B as it reads but then click on the "Add More Details" box (or maybe "Edit Details"), and the "Start" button, (or maybe "Edit.)

On the next page select the first option which is "I need to add or fix info about this sale that's on my Form 1099-B." Tell TurboTax that the 1099-B is reporting the wrong basis. That's the interview you want and that's where you can fix things. Tell TurboTax that the 1099-B is reporting the wrong basis and then enter the "missing" compensation to get to the correct basis.

TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.

Tom Young

T

tuandad

Employee

Thank you much

K

klide121

Is there updated information?

J

JamesG1

You would have an employee stock purchase plan sale reported on your W-2 as well as reported on a 1099-B

only if you sold stock that was purchased through an ESPP (Employee Stock Purchase Plan).

In such a case, the sale will be reported on Form 1099-B, which you should receive from your brokerage around tax time (early February is typical). Enter the 1099-B to report the sale on your tax return.

If you merely purchased (but didn't sell) ESPP shares, there's nothing to report.

Hopefully you received information about your benefit from your employer and/or your broker.

Click on the Search magnifying glass in the upper right hand corner of the screen to find information about how to enter your particular benefit.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

P

paul_1959

Need clarification on steps for 2020 (using TT Home & Business) on this subject, to be clear I sold Employer stock plan shares - I received a 1099-B which includes an ordinary gain & a capital gain and a W2 with the same amount for the same ordinary gain in box 1 and Box 14 valued with QDI (Qualified Dividend Income) same amount (ordinary gain). How do I make the adjustment and eliminate the duplicate income?