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Income Double Taxed (W-2 & 1099-B)

Forum|Forum|4 years ago
February 11, 2022
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I was part of a startup which sold in 2021. During 2021, I did not work for the startup, but they sent me a W2 for the sale. It appears to be for the sale, however the amount on the W-2 does not match the proceeds I received in 2021 (posting a separate question for that). Upon entering both the 1099-B and the W-2, My tax payment skyrocketed to nearly 50% of the proceeds from the sale. Deleting either cuts the tax bill down to ~20% of the sale (about 25% if I leave the W-2 and 19% if i leave the 1099-B).

How can I get TurboTax to recognize that these 2 forms are for the same transaction?

TurboTax Home & Biz Windows

Best answer by SteamTrain

Turns out the purchasing company registered their purchase a month and a half before I finished signing documents. They misreported the date and won't fix it. Sadly their misrepresentation of transactions has cost me an extra 10% of my investment which isn't an investment now.

Interesting

...a few days after we started this train of comments, I started wondering if there weren't some strange rules involved with a company sale, where the sale date locks-in the agreed price of the stock, and that date is used for the holding date for you, even if they might be allowed to actually execute the actual stock sale and distribute the proceeds several months later. Almost sounds like that's what is happening here.

SteamTrain

Employee

Sounds like a Non-qualified stock option sale.

IF the "gain" on the sale of start-up stock is reflected on your W-2, you are supposed to update the cost basis on the 1099-B to be the same as it's full value as on the date of sale...thus no gain on the 1099-B transaction (or a slight loss due to brokerage fees).

___________________

If it isn't related to NQSO stock sale, or disqualifying sale of ISO shares. Then you may have to explain some more, and perhaps someone more knowledgeable will be able to answer (as that would be beyond me)

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

V

ViperXpyroAuthor

Wow. Fast reply, thank you!

Nothing in my documentation says it is non-qualified. This is ISO that is > 2 years from grant and > 1 year from exercise, so it shouldn't be disqualifying.

If I adjust the cost basis as you say (my 1099-B has no cost basis listed, so I entered it manually from when I exercised it), then I am certain I will only have the W-2 earned income tax, however this was an investment I made so it SHOULD be capital gains no? Capital gains (not W-2 income) was also how the company told their employees the tax scenario would be.

SteamTrain

Employee

Assuming you actually did an exercise where you purchased and held the shares over a year earlier?

For an ISO, you are really going to have to carefully check the date of your original exercise vs date of sale on the 1099-B. In my somewhat uneducated opinion, no W-2 should have been issued if over 1 year from original exercise.

@TomD8 don't you have more experience with the ISO/NQSO stuff than I do?

Am I off base here?

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*