Each year I sell the ESPP immediately to harvest the discount (15% off lowest of the start or end of year stock price). As it is a disqualifying distribution, the discount is reported as W2 income. However, the basis on the 1099-B I receive from brokerage does not include this amount reported as W2 income and is therefore incorrect. If you do not adjust the basis you will be double-taxed on the discount amount.
To correct this, in TurboTax Deluxe I enter the 1099-B info as requested, then click the "I'll enter additional info on my own" to access the "Corrected cost basis" box. Here I enter the Fair Market Value on Purchase Date * Shares Sold (I sell them all so this is equal to # shares purchased).
So for my example:
- Invested $13,000 in ESPP
- Discount Purchase price $6.61 * 1966 shares = $12,995.26
- FMV at Purchase Date: $8.61 * 1966 Shares = $16,927.26
- Amount of W2 Income Reported ($8.61 - $6.61) * 1966 Shares = $3,932.00
- Net proceeds from sale = $15,859.30
So my 1099-B reported item 2 as my basis and in TurboTax I added Item 3 as my Corrected Cost Basis. When I adjusted the basis, my tax liability was reduced by more than $900.
Submitted February 01, 2019 at 09:09PM by Jamieson22 http://bit.ly/2WyjHkY
