W2 doesn't include all disqualified ISO as compensation - needs correction?

Forum|Forum|3 years ago
March 10, 2023
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We accidentally sold an ISO purchase from 2021 a few days too early, so it became a disqualified ISO and counts as compensation. The company didn't catch this - they only listed disqualified ISO exercised/sold in 2022 (same-day sale) on the W2.

Turbotax allowed me to report that some disqualified ISO sales weren't included in the W2, and the software added it to the 1040 correctly. Can I just go with what Turbotax did, or should I require that the company reissue the W2 so that it reflects ALL disqualified ISOs on the 2022 tax return? Which is more likely to cause an audit?

Best answer by hbl3973

bluecloud33,

https://smallbusiness.chron.com/disqualified-dispositions-w2-income-terminated-employees-16755.html

says, yes, the W-2 should be corrected. However, you can continue your tax returns to the point just prior to e-file so that you know whether you will owe the IRS and/or your state and, if so, prepare extension form(s) with the amount(s) due should the company be slow or obstructive in making the correction.

Also, do read https://www.irs.gov/taxtopics/tc154 which gives the steps to take in getting a corrected W-2.