Yes, employers are obligated to track the compensation element of an ESPP disposition (sale) and are also required to include the compensation element (income) in box 1 on the W-2. This requirement for employers is expressed in IRS Publication 15-B as follows:
The employer must report as income in box 1 of Form W-2 (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon a qualifying disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option.
Here is a link to the above: IRS Publication 15-B at Employee Stock Options
Regarding your second question, yes. In a disqualifying disposition, your employer should include in box 1 of the W-2, the discount element, or the spread, which is as you noted, the 15% discount amount multiplied by the number of shares purchased. If your sale was a qualifying disposition, calculating the amount to include in box 1 is a more involved because the employer is performing two different calculations and taking the lesser of the two. In a disqualifying disposition, calculating the income to include in box 1 involves just one calculation and just looks at the amount of the discount on the day the option to purchase shares is exercised.
While employers are required to track the amount of income to include in box 1 on the W-2, it makes sense to double-check that such amount was in fact included and further, that it is accurate.
@Iseewhatshappeninghere
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
