Question

ESPP Offset Generates a W2

Forum|Forum|1 year ago
January 28, 2025
1 reply
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My former employer generated a 2024 W2 for ESPP "offset" which I had already paid taxes on. I sold stock but I have not worked there in two years. Now there is a tax event with the IRS for something I already paid the IRS for.

Yes, I asked my former company this question but please understand that these people simply go through the process and really don't know the answers.

I have worked for other companies that have an ESPP program and have never had a subsequent tax event. Any help is greatly appreciated.

F

freddytaxAuthor

And I expect a 1099-B but I have no idea what this has to do with making money and a W2.

AmyC

Employee

Taxes on ESPPs are levied when you sell your stock--both as compensation income and as capital gains.

Your employer purchased stock on your behalf and you should have received Form 3922 -- "Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c)". This form is purely informational, but is important for record-keeping.

When you sell the stock, the company will send a 1099-B, as any broker would. Any discount received on the initial purchase or other funds deemed "compensatory" will then be reported as income on your W-2 for that tax year.

That income on your W2 is part of the basis you need to be sure is reported when you enter the 1099-B. It is often not included in the basis listed on the 1099-B. It could be, so be careful and use your form 3922 and w2 to determine your correct basis.

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F

freddytaxAuthor

Thanks, AmyC! Is this something new? I've sold ESPP over the years and usually just report my cost basis and any gain or loss per the 1099-B. Do I report the W2 earnings and then make an adjustment within TurboTax? Do I report my employer information for a place where I have not worked for nearly two years?

Thank you for your help!!