ESPP, 1099-B and Form 3922

[RMD20201]

Hi,

I purchased shares through ESPP and sold the shares as soon as they were available in 2022.

I received a 1099-B and the difference between Box 1d (Proceeds) and Box 1e (Cost Basis) is ~$2,000. Box 1b: Date acquired is 11/30/22 and Box 1c: Date sold or disposed is 12/01/22.

I also received Form 3922 from my employer and it has:

Box 1 (Date Option Granted): 6/1/22, Box 2 (Date Option Exercised): 11/30/22
The difference between Box 4 (FMV per share on Exercise Date) and Box 5 (Exercise price paid per share) multiplied by the # of shared transferred (Box 6) is ~$1,500. 

When I filing out the 1099-B information on TurboTax, do I enter the information for box 1d and 1e from Form 1099-B or Form 3922? And is the Sale category: Box A - Short term covered?

I do not see TurboTax asking me any question which would prompt me to enter the information on Form 3922.  

I would greatly appreciate any guidance I can receive.

Thank you.

[ThomasM125]

You enter the form 1099-B in TurboTax to record the investment sale. You may need to adjust the cost basis to add the income reported on your W-2 form that is from the stock sale. You should enter the 1099-B form as it is stated, and then there is an option to change the cost basis as is necessary. Your W-2 form will report any ordinary gain associated with the employee stock as wages in box 1, and that may need to be added to the cost basis on the form 1099-B if it reports the cost of the stock without compensating for the amout of that cost reported on your W-2 form.

1. Choose the Federal option on your left menu bar
2. Choose Wages & Income
3. Choose the Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto) option
4. Choose the Stocks, Bonds, Mutual Funds option
5. Enter your Form 1099-B information and check the box  that says "The cost basis is incorrect or missing on my 1099-B" and you will see an option later to enter the correct cost basis

[RMD20201]

ThomasM125 - THANK YOU for the detailed response. I have one follow-up question for clarification.

You mentioned "Your W-2 form will report any ordinary gain associated with the employee stock as wages in box 1, and that may need to be added to the cost basis on the form 1099-B if it reports the cost of the stock without compensating for the amount of that cost reported on your W-2 form." > How would I know if any of the amount in box 1 is for the ordinary gain associated with ESPP? In box 14 Other, I see an amount for MAPFML and an amount for ESPPD. And this amount for ESPPD matches the difference between Box 4 and Box 5 multiplied by the # of shares exercised under ESPP. on Form 3922.

Thank you.

[GeorgeM777]

You wouldn't because your W-2 should not reflect the amount of any gain you had from the sale of your ESPP shares.  Rather, it should reflect the discount you received when you purchased the shares.  The discount is the difference between the exercise price (the price you paid for the shares) and the market price on the exercise date.  That discount--which is usually 15% for many firms, but it could be less depending on the plan--is a form of compensation, and therefore, firms are required to include the discount amount on the W-2.  If it's not there, then employees need to report it.   If you have some doubts as to whether your W-2 includes the discount, you might consider verifying with your firm that it does.  

Your 1099-B, or similar document, should reflect whether you had a gain or loss on the sale of your ESPP shares.  It is possible that your cost basis may not be accurate on your 1099-B.  The cost basis for your shares should be the market price on the date you purchased your shares--box 4 on Form 3922--multiplied by the number of shares purchased.  Your box 14 amount could pertain to family medical leave, and if it does, it is not relevant to your ESPP purchase/sale. 

@RMD20201 

[RMD20201]

Thank you, @GeorgeM777 and @ThomasM125, for the detailed explanation.

@GeorgeM777 :
FYI - On my W-2, Box 14 "Other" has entries for both MAPFML (i.e. FMLA) and ESPPD. Taking yours and @ThomasM125 sound advice, I have entered the 1099-B information and then adjusted the cost basis in a subsequent screen "Select any less common adjustments that apply", I selected "The cost basis on my statement is incorrect" > entered, as you suggested, the market price on the date of shares were purchased --box 4 on Form 3922--multiplied by the number of shares purchased.

Net-net, if I have a gain then total gain to report/calculated is equal to the 15% discount I received from my company as part of the ESPP and it is that simple. Not sure why it is complicated with the 1099-B and Form 3922.

The odd thing is that the 1099-B Box 1d has an amount that does not match with the price on either Grant/Exercise date multiplied by the number of shares purchased. Box 1e on 1099-B matches Form 3922 Box 5 multiplied by the # of shares. Will reach out to the brokerage firm so I understand this better for next time 🙂 If you have some info on this, please do share. 

Greatly appreciate your help. Thank you!! 

[GeorgeM777]

The sales proceeds as reflected in Box 1d may have been reduced by commissions which could be the reason why you are seeing a difference in the Box 1d amount versus the amounts as reflected on Form 3922.   

@RMD20201 

[RMD20201]

@GeorgeM777 I just came across the 2022 Year-End statement from the Brokerage firm and I see the DISQUALIFYING DISPOSITIONS section. I participated in ESPP for the 6-month period 
Date Option Granted: 06/01/2022
Date Option Exercised: 11/30/2022
So, is the Taxable Compensation ordinary income based on https://turbotax.intuit.com/tax-tips/investments-and-taxes/empl[product key removed]ase-plans/L8NgMF...? Is this why on W-2's Box 14 (Other), I have the amount (Gain calculated on Form 3922: (Box 4 minus Box 5) multiplied by shares in Box 6) suffixed with ESPPD and this is ordinary income? Then, do I have to show this on Schedule D as well and then, I would be taxed 2 times?

[HopeS]

You are not being doubled tax since you are only being taxed on the gain on the date of sale. When the stocks were exercised this was reported as compensation on your paycheck (ordinary income treatment). Therefore, you will need to know the basis of those stocks on the date of exercise so you can compute the correct gain/loss upon sale. You show the sale of the stock on your 2022 Schedule D (capital gain/loss from sale) exactly as it is shown on Form 1099B. Not reporting this as shown on Form 1099B may result in a notice from the IRS. 

Please see additional helpful information in the link below:

Employee Stock Purchase Plans

@RMD20201 

[RMD20201]

Thank you!!