Does turbotax recognize Stock Appreciation Right (SAR)? It is type of employee stock plan. Turbotax list includes ESPP, NQSO, ISO, RS, RSU but not SAR. Please advise?

[blassjr]

My employer, I believe, has recognized this on my W-2. 

[TomYoung · Accepted solution]

I would say that generally you can use the RSU step by step interview, but do you really need to?

I guess that you've been awarded some amount of your employer's stock and the "fair market value" of the award, (or, if you paid something for the stock, the "spread" between the amount you paid and the "fair market value" of the award), has been reported as compensation on your W-2. 

Further, since you've referenced a TurboTax list that "includes ESPP, NQSO, ISO, RS, RSU", I guess that some of that stock has been sold.  It's been sold either "for taxes", (i.e., you paid nothing for the stock), for a "cashless exercise", (i.e., you did need to pay some amount for the stock and the sale funds that payment plus the taxes), or you personally sold some stock "for cash", (i.e., "fun money!"). 

It doesn't really matter why you sold the stock, your basis in the stock in all cases is the same: it's the per share "fair market value" used by the employer to calculate the compensation reported on the W-2 for the GROSS amount of the award. 

Examples:

1) You were awarded 100 shares and 30 shares were withheld or sold "for taxes" and your employer reported compensation of $1,000.00 for this award.  Your per share basis is $1,000 / 100 = $10.00 per share.  That's the per share "fair market value" your employer used to calculate the compensation.

2) You were awarded 100 shares and had to pay $2.00 per share and 44 shares were "sold to cover" and your employer reported $800.00 for the award.  Your per share basis is $800 / 100 plus the $2.00 you had to pay for each share = $10.00 per share.  That's the per share "fair market value" your employer used to calculate the compensation.  (($10 -$2) x 100)

The next thing to understand is that there's no "income tax reporting" reason to use any of the "employer stock" step by step interviews to report the sale.  Nowhere in the income tax return is there any indication that "this stock was acquired through an RSA/RSU/ISO" etc.  IF you know the correct basis in the stock - and you should - THEN you can simply report the sale as a sale of "stock". 

The only issue with reporting the sale of employer stock is that brokers only need report the "out of pocket" basis of the stock sold.  (That would be either "$0" or ("$2 x number of shares sold) using our examples.)  So what you need to do is to simply enter the 1099-B exactly as it reads and then click the blue "I'll enter additional info on my own" button.  On the next page enter the correct basis in the "Corrected cost basis" box.  The correct basis is: (# of shares sold) x (per share basis for that lot.)

Tom Young

(SINCE THE DEVELOPERS CHANGE THE SECURITY SALE INTERVIEW EVERY SINGLE YEAR I'LL NOTE THAT THIS ANSWER'S DIRECTIONS ON HOW TO CORRECT THE BASIS FOR THE SALE PERTAINS TO THE 2016 INCOME TAX YEAR.  I'M SURE THAT THE INTERVIEW WILL CHANGE IN THE YEARS AFTER THAT.)

[pbs126]

Similar to the initial question, I have "Stock Appreciation Rights" or SARs.  Turbotax options for 2020 for the 1099-B correction of the adjusted basis is to select from: ESPP; NQSQ; ISO: RSU: RS; Stock non-employee; Mutual Fund/Index Fund/ETF; Bond; or, Options.  As I understand your answer, the recommendation is to select "RSUs" from the dropdown box for reporting earnings on these SARs.  Correct?

[MarilynG1]

@pbs126 You could use the RSU option; however, these options in the Employee Stock Interview are to help you determine your Cost Basis for reporting the sale on your 1099-B correctly.

If you know your Cost Basis, you don't need to use the Employee Stock interview; just enter your 1099-B and indicate you need to change the Cost Basis, and enter the correct amount on the next screen (screenshot). 

Click this link for info on How to Enter 1099-B. 

[pdarin]

If the SARs vested in 2017, what should I be doing to record them as a long term gain vs. short term or are they always treated as short term because you sell and settle on the same day?  I sold for cash if that matters.

[GeorgeM777]

A capital gain/loss is long-term if the stock was owned for more than one year (i.e., one year plus one day).  A short-term capital gain/loss relates to a stock owned for one year or less.  If your shares vested and were sold on the same day then that would be short-term; however, if the vesting and sale were done in 2017, then you report that transaction on your 2017 tax return.

If you know your cost basis, sale proceeds, date vested, and date sold, then you can just report the transaction as you would a regular stock transaction.  What did your SARs offer you?  For example, were you given the option to purchase shares at a price lower than the market price?  If so, then maybe your SARs are similar to an employee stock purchase plan (ESPP).  It all depends on how your company's SAR plan works.  If you have more information about your SAR plan, you can follow-up with additional information.  

@pdarin