Because the TurboTax screens that address ISOs request information about "shares exercised," "shares purchased," and "shares sold," it may work better to enter the number of shares you received--2,950--rather than the 2,500 that were exercised years earlier. At this point, it's not clear why the difference exists; however, for tax purposes, you did receive and sell 2,950 shares and if you work with that number of shares, you should be able to clear the error in TurboTax.
You may have already reviewed the screens that relate to Qualified Small Business Stock, but if not, there are screens that address the qualifications for QSBS. After entering your information about your ISOs, you should see the following screens:
- Stock Option Lot Summary, Select Done
- Your Incentive Stock Option (ISO) Results, Select Continue
- Select any less common adjustments that apply, check the box The gain (or loss) from this sale is eligible for special treatment because it's from qualified small business stock...
- On the following screens, there will be questions about your QSBS.
Assuming you meet the requirements for the sale of QSBS, TurboTax will apply the Section 1202 adjustment.
@Payroll7052
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