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Where is the question on whether ESPP ordinary income is included on W2

Forum|Forum|6 years ago
June 4, 2019
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I know there is a question asking whether the ESPP ordinary income was included on the W2 or not, but can't find it anymore, and I need to change the answer. How do I navigate to that question?

TurboTax Premier Online

Best answer by TomYoung

You don't see that question while entering trade information or editing trades you've already entered. That question comes up only if you used the "ESPP" step by step interview and only when you're completely done entering trades and click the "Done" or "Continue" button that takes you further into the "Stocks, Mutual Funds, Bonds, Other" interview. You must work all the way to the very end of the interview.

Tom Young

T

TomYoungAnswer

Employee

You don't see that question while entering trade information or editing trades you've already entered. That question comes up only if you used the "ESPP" step by step interview and only when you're completely done entering trades and click the "Done" or "Continue" button that takes you further into the "Stocks, Mutual Funds, Bonds, Other" interview. You must work all the way to the very end of the interview.

Tom Young

W

wesher

Go to the ESP Comp WKS. Uncheck the "yes" box and check the "no" box. The amount will then be transferred to line 7 1040

F

Fern

Employee

When entering the sale of the shares, indicate that the sale involves an employee stock purchase plan. See screenshot below. You will then be prompted to enter information about the sale and the amount that is reported on your W-2.

To enter the sale:
• Select Federal Taxes
• Select Wages and Income
• Select Show More at Investment Income
• Select Start at Stocks, Mutual Funds, Bonds and Other

Employee stock purchase plan shares are purchased at a discount. The discount the employee receives on the stock purchase is considered compensation and is reported as ordinary income. Your basis in the stock purchase will be the amount paid for the stock plus the compensation income reported.

The sale of these shares are reported on a Form 1099-B. The capital gain or loss is the difference between what the stock sold for and your basis.

See the article below for more information.

https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Employee-Stock-Purchase-Plans/INF12047.html

P

praveenswadi

I don't see these screens anymore. I am using TT Premier online. Instead of the first screen where the information is in column format, the new UI shows tabular entry for each cell. And the second screen, highlighted option - not available. 😞 I remember seeing this last year's return. Not anymore.
Also, talked with a number of friends and at least 2 acknowledged running into same issue. 😞

A

Anonymous

Has anyone run into this issue in the latest online version for the 2020 tax year?

I went through the full ESPP workflow, it allowed me to adjust the basis for ordinary income, but never asked me if the ordinary income was on my W2.

D

DianeW777

As long as you entered the correct stock basis and selected Long term noncovered (held more than one year) or Short term noncovered (held one year or less) this places the sale on the appropriate section of Form 8949. This selection of 'noncovered' clarifies that the basis, if any, on your Form 1099-B needed to be adjusted.

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A

Anonymous

Hi @DianeW777 denoting the correct "noncovered" may allow you to appropriately adjust the basis on the 8949, but I don't believe it impacts whether or not the ordinary income was appropriately reported in the W2. This would need to be adjusted at the income level on your 1040, which in prior years there was the option during the workflow to select if it has already been reported in your W2 or if it needs to be added as ordinary income.

When I select covered or noncovered in the flow, in neither instance does it appropriately add back the income to the total income line when I go to tool > View Tax Summary.

D

DianeW777

The actions that needs to take place in TurboTax Desktop version are shown below. The following link is helpful as well.

Employee Stock Purchase Plans

The steps to this screen are entered below for your convenience.

Open your TurboTax account (Desktop Only)
Scroll to Investment Income > Stocks, Mutual Funds, Bonds, Other > Update > Edit beside the ESPP stock sale
Continue > Edit > Enter the requested details for this stock > Choose the Sale Category > Continue
Continue or review your information on Less common items > Done
Yes stock was acquired through employee stock plan > No do not remember this answer for all sales > Continue
Select Employee stock purchase plan (ESPP) > Continue > Select Company > Enter number of shares sold > Select owner
Continue > Select I have all my info ..... > Continue > Enter your information under short or long term as applicable
Notice the compensation is shown at the bottom > Continue until you come back to the summary screen for this ESPP sale
Done > Done > Done > Your Employee Stock Plan Results screen appears with the selection for the W-2
Select Yes or No based on your situation
See the images below.

This should allow you to complete this transaction and finish your tax return. Thank you for your patience.

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R

rw34394

On this portion in TurboTax, where I "check that the following employee stock plan amounts were included in box 1 wages", the "Amount We Computed" by TurboTax is $0.26 more than the amount that shows up on the W-2.

Do I still answer "YES"? even though the amount doesn't exactly match? should I be concerned about this difference???

(If I answer "NO", my refund amount is a lot lower, and there's no way for me to correct the $0.26 difference.)

DawnC

Employee

Yes, you can answer YES. The 26 cents is due to rounding, which is allowed. You already paid tax on that W-2 income and if you answer NO there, you will be paying tax on it twice. And no one has to pay taxes on income twice. @rw34394

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DaveF1006

If you are working in Turbo Tax online, here are the steps.

As you start entering your stock sales, the program will eventually ask Do these sales include any employee stock, here you say yes.
Then as you begin entering your stock information, under sale information>what type of investment did you sell>select Employee Stock purchase plan (ESPP) Then enter the sale information.,
Next screen asks, Adjust your cost basis to ensure your best outcome. Then select I can't find it, I need some help
Then there will be a screen asking you is it from an employer with an existing W2 or is one without. Make one selection or the other.
Next screen will say Now, we'll walk you through entering the rest of your sales info. Select sounds good.
Next screen is where you enter your ESPP sales information. If compensation income was not included on a W2, put 0.
Finish the section.

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I

Iseewhatshappeninghere

Employee

Hi. Thanks for this discussion.

I imported my 1099-B from the broker (or whatever its called) website, and the RSU and ESPP 1099-B was imported into TT. I then went through each of the lines of groups of stock that were sold, and updated the supplemental information by adding in the various prices TT asks for from the 3922 (price on purchase date, grant date, paid price etc). Every time I entered each, for ESPP, my tax due went lower and lower, because the cost basis was going higher, because the cost basis updated to not take into account the 15%, which I believe is correct.

I have both long term and short term covered (I dont know if that is qualifying or disqualifying) on my 1099-B.

I also left Box 2 (which asks whether it is an ordinary gain or loss) for each of these stocks unchecked, because there was no box 2 on the 1099-B.

At the end, when I said done with all the 1099-B accounts, it asked me whether any of the ESPP are included in my W2 (it didn't say anything about ordinary as the OP in this post is asking). For RSU I said yes, but for ESPP, I wasn't sure, so I clicked No, and my tax due jumped up back to the amount that it was before I started entering all the supplemental 3922 information. So all those hours of figuring that out was wasted. What was the point of TT asking me all those questions about updating the cost basis if it will ignore all that anyway?

Other information I know is that ESPP is pre-tax.

The W2 does mention RSU in box 14. I don't see ESPP specifically listed, but could be in box 1.

Thank you.

M

MonikaK1

With ESPP, when the company buys the shares for you, you do not owe any taxes. You are exercising your rights under the ESPP. When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income.

If you hold the stock for a year or less before you sell it, any gains will be considered compensation and taxed as such.
If you hold the shares for more than one year, any profit will be taxed at the usually lower capital gains rate.

How much of the stock sale price is compensation and how much is capital gain depends on whether your stock sale is a qualifying disposition or a disqualifying disposition.

Disqualifying disposition:

You sold the stock within two years after the offering date or one year or less from the exercise (purchase date).

In this case, your employer will report the bargain element as compensation on your Form W-2, so you will have to pay taxes on that amount as ordinary income.
The bargain element is the difference between the exercise price and the market price on the exercise date.
Any additional profit is considered capital gain (short-term or long-term depending on how long you held the shares) and should be reported on Schedule D.

Qualifying disposition:

You sold the stock at least two years after the offering (grant date) and at least one year after the exercise (purchase date).

If so, a portion of the profit (the “bargain element”) is considered compensation income (taxed at regular rates) on your Form 1040.
Any additional profit is considered long-term capital gain (which is taxed at lower rates than compensation income) and should be reported on Schedule D, Capital Gains and Losses.

Please see this TurboTax article for more information and examples. This article also offers examples.

Contact your employer or their payroll office for more information if you are not sure how the compensation portion of the employee stock was shown on your W-2. It may be included in your Box 1 wages and listed separately in Box 14.

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