Question

reconcile 1099B and W2 reporting of stock option exercise

Forum|Forum|4 years ago
February 23, 2022
1 reply
0 views

My company sends me a W2 which showed in Box 1 only the non-statutory stock option gain of $5000 and in Box 12a showing "V" referring to "non-statutory stock option exercise".

Basically I exercised the stock option grant (same grant - same strike price) 10 times during 2021, each time with different number of shares and different sale proceeds. And I sold immediately upon exercise so there is no further sale gain beyond exercising the stock option. I received a 1099B with both a summary of total proceed and total cost base, as well as detailed listing of each of the 10 exercises. They were reported as short term covered without the need for adjustment on 1099B. The total proceed, e.g., $15000, the cost base $10002 - the $2 is the brokerage firm total processing fees for the stock option exercise.

I asked this question on this board, some experts said that I can summarize the 10 exercises into 1 consolidated proceed and one consolidated cost base, and add the W-2 amount to the 1099B cost base, without having to list all 10 exercises one by one. However, some suggested that I need to send in 1099B or a list of all 10 exercises to IRS. I called the brokerage firm and was told that they have already sent the 1099B to IRS - exactly the same one as I have received. Why do I need to send it again to IRS?

Other experts suggested that I import 1099B from the brokerage firm so all 10 exercises are entered individually. However, how do I adjust the 1099B cost base for each of the 10 exercises? The W2 only shows the total gain from the option exercises but did not break down one by one. And exercise different number of shares each of 10 times. Do I just average it? Wouldn't that be more confusing to the IRS?

What is the best way to adjust the cost base using information from W2 to be super clear to the IRS?

Thanks for experts' help ahead of time.

J

JillS56

The reason it was suggested that you send the 1099B with the return is that it would speed up the processing of your return. Without the 1099B attached it could slow down processing.

My recommendation on the entering of your 1099B transactions is that you consolidate the transactions into one, then add the $5,000 to your basis. If you try to break everything down more or average to spread the cost basis over all 10 transactions I think you are sending a red flag. Whether you attach the 1099B or not, the IRS does have access to the 1099B. When someone at the IRS sits down to review your file, they may not be able to come up with your calculations and when it doesn't match what the 1099B shows, it will cause you all kinds of grief and delay.

Make it simple for the IRS to figure out.

T

Tax2019PayAuthor

Thanks. Make sense. A few follow up questions:

Q1: So it is not a good idea to download the 1099B from brokerage firm into Turbo Tax since that prevents me from summarizing, correct?

Q2: Does Turbo Tax allows me to attach a 1099B or do I have to send it in by mail after eFile?

Q3: When I add the W-2 amount to the cost base of 1099B, is it easy for the IRS to figure out by adding the W2 number and 1099B number? Is there anywhere in Turbo Tax I can explain this addition of 2 numbers for adjustment? This is where I got hang up, I do not know if everyone at IRS reviewing the tax return will understand this. Also will the initial electronic processing identifies this as a red flag.

Q4: It was also suggested by nearly all experts for ordinary stock transaction to summarize all per category, e.g. those with short term covered, without listing every transaction out, and there is no need to send in 1099B for those. Is this also your recommendation?

R

RobertB4444

A1: You should not import the 1099-B if you are going to summarize the transactions.

A2: After you enter the summary totals then you will be prompted with the option to attach the 1099-B. You can attach it then.

A3: The addition to the cost basis is on your W2 so it is traceable for the IRS. This will definitely not hold up your initial electronic filing. It may lead to a delay while the IRS figures out what you've done. But what you're doing is exactly what the IRS instructs you to do.

A4: If you are entering all the transactions and they are all covered transactions then the IRS doesn't need the 1099-B. I would still send it - the attachment is easy and it's right there to keep them from having to match documents.

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