ESPP, 1099-B and Form 3922

Forum|Forum|3 years ago
February 25, 2023
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Hi,

I purchased shares through ESPP and sold the shares as soon as they were available in 2022.

I received a 1099-B and the difference between Box 1d (Proceeds) and Box 1e (Cost Basis) is ~$2,000. Box 1b: Date acquired is 11/30/22 and Box 1c: Date sold or disposed is 12/01/22.

I also received Form 3922 from my employer and it has:

Box 1 (Date Option Granted): 6/1/22, Box 2 (Date Option Exercised): 11/30/22
The difference between Box 4 (FMV per share on Exercise Date) and Box 5 (Exercise price paid per share) multiplied by the # of shared transferred (Box 6) is ~$1,500.

When I filing out the 1099-B information on TurboTax, do I enter the information for box 1d and 1e from Form 1099-B or Form 3922? And is the Sale category: Box A - Short term covered?

I do not see TurboTax asking me any question which would prompt me to enter the information on Form 3922.

I would greatly appreciate any guidance I can receive.

Thank you.

ThomasM125

You enter the form 1099-B in TurboTax to record the investment sale. You may need to adjust the cost basis to add the income reported on your W-2 form that is from the stock sale. You should enter the 1099-B form as it is stated, and then there is an option to change the cost basis as is necessary. Your W-2 form will report any ordinary gain associated with the employee stock as wages in box 1, and that may need to be added to the cost basis on the form 1099-B if it reports the cost of the stock without compensating for the amout of that cost reported on your W-2 form.

Choose the Federal option on your left menu bar
Choose Wages & Income
Choose the Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto) option
Choose the Stocks, Bonds, Mutual Funds option
Enter your Form 1099-B information and check the box that says "The cost basis is incorrect or missing on my 1099-B" and you will see an option later to enter the correct cost basis

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RMD20201Author

ThomasM125 - THANK YOU for the detailed response. I have one follow-up question for clarification.

You mentioned "Your W-2 form will report any ordinary gain associated with the employee stock as wages in box 1, and that may need to be added to the cost basis on the form 1099-B if it reports the cost of the stock without compensating for the amount of that cost reported on your W-2 form." > How would I know if any of the amount in box 1 is for the ordinary gain associated with ESPP? In box 14 Other, I see an amount for MAPFML and an amount for ESPPD. And this amount for ESPPD matches the difference between Box 4 and Box 5 multiplied by the # of shares exercised under ESPP. on Form 3922.

Thank you.

GeorgeM777

You wouldn't because your W-2 should not reflect the amount of any gain you had from the sale of your ESPP shares. Rather, it should reflect the discount you received when you purchased the shares. The discount is the difference between the exercise price (the price you paid for the shares) and the market price on the exercise date. That discount--which is usually 15% for many firms, but it could be less depending on the plan--is a form of compensation, and therefore, firms are required to include the discount amount on the W-2. If it's not there, then employees need to report it. If you have some doubts as to whether your W-2 includes the discount, you might consider verifying with your firm that it does.

Your 1099-B, or similar document, should reflect whether you had a gain or loss on the sale of your ESPP shares. It is possible that your cost basis may not be accurate on your 1099-B. The cost basis for your shares should be the market price on the date you purchased your shares--box 4 on Form 3922--multiplied by the number of shares purchased. Your box 14 amount could pertain to family medical leave, and if it does, it is not relevant to your ESPP purchase/sale.

@RMD20201

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