I assume this stock was acquired via Non-Qualified Stock Options and I assume the exercise of the options happened in 2015.
If those assumptions are correct then understand that the act of exercising creates compensation income reported on the W-2. It's not the sale of the stock that creates the compensation income, it's the exercise, and because compensation income is created there needs to be taxes withheld. The compensation income created by exercising the options is added to the amount you paid to exercise to determine the stock's basis. The compensation income is calculated by the difference between the fair market value of the stock and the price you paid.
So if you had a NQSO for 100 shares at a price of $8.50 per share and exercised that option when the per share fair market value was $10.00, the exercise would create compensation income of (100 x $1.50) = $150. Your total basis in the stock would be (100 x $8.50) + $150, for a per share basis of $10.00, or the same as the fair market value at the exercise date.
Starting in 2014 broker's didn't have to include the "compensation" element in their report of basis on the Form 1099-B, only the "out of pocket" basis. So, if you simply enter the 1099-B "as it reads" you would report the income associated with the stock twice: once due to the exercise ("compensation") and then again by overstating the gain (or understating the loss) from the sale. That's why I said "The more probable issue here is that are using the wrong basis to report the sale."
You need to add the per-share compensation number to your per-share purchase price number in order to correctly report your trade. So go back to your W-2 and/or whatever paperwork was provided to you along with the exercise of the stock to get that per-share number. Multiply that per-share number by the number of shares sold and you'll have the total dollar amount of adjustment you need.
Using the default spreadsheet-like "fill in the boxes" 1099-B entry form in TurboTax enter the 1099-B exactly as it reads.
Tick the box next to "This sale involves an employee stock plan (including ESPP) or an uncommon situation."
Click the blue "Start Now" button that shows up and then click the radio button next to "My 1099-B has info I know isn't right, or it has extra info I need to add."
That will allow you to add the missing amount of basis and TurboTax will show all this correctly on Form 8949.
Tom Young
