This is a NQSO where the stock is granted to an employee at a set price (usually the going price of the stock at the grant date but sometimes at a discount) and the employee can exercise the stock at a time of his/her choosing in the future, with the future usually limited to within X number of years. The idea is to incentivize employees to work hard and bring the stock price up, therefore making it worthwhile to exercise the option at some future date at a higher price per share than the price when the option was granted. If the price falls below the grant price, well, no sense in exercising it. When exercised, it is done as a 'cashless' sale- it is a short term gain reported on a 1099-B AND on the W2 as ordinary income. The employee reaps the benefit of the grant price (say 200 shares at $50/share) vs the future sale price (say $75/share). You absolutely are given both a W2 for the gain- in my example ($75-50)*200 = $5000 gain minus any taxes taken out on the W2. The brokerage absolutely ALWAYS reports this cashless sale on a 1099-B while the employer reports the gain on the employee's W2 as ordinary income. I literally have many years where this is the case. Turbotax used to handle this case seamlessly but obviously the institutional knowledge has been lost since the only way it can be handled now is to do an overide on the Form 8949, specifically Part I (g), to show a negative number. Otherwise, Turbotax will count BOTH the gain reported on the W2 and on the 1099-B, vastly inflating the taxes due. Please listen to what I am saying as likely I've used Turbotax longer than you and am very familiar with cashless exercises, having done many over my 35+ year career. Its only been since about 2022 that Turbotax has FAILED with cashless exercises of NQSO and required the override, therefore eliminating the ability of file electronically and violating truth in advertising. Please fix this obvious mistake in the software code. It should be easy to do as you used to account for such sales.
