You enter your W-2 which includes the compensation created by your sale of the stock using the W-2 interview.
If you did not get 1099-B then you don't have to report any stock sale, though you might want to anyway as you'll likely have a small loss (next paragraph).
If you got a 1099-B then you need to enter the sale of the stock. You basis for the sale is the option exercise cost of the stock you sold plus the compensation income created by the gain. Your most likely outcome is a small loss due to selling commissions and fees. You enter the sale using the "Stocks, Mutual Funds, Bonds, Other interview and you have two ways of entering the sale. You can use the default TurboTax 1099-B entry form, enter the 1099-B as it reads, (it will have only your "exercise cost" basis) and then click on the "I'll enter additional info on my own " blue button. On the next page enter the correct basis in the "Corrected cost basis" box. The correct basis is (number of shares sold) x (correct per share basis, which includes the compensation per share). Or, after entering the 1099-B as it reads you can click the blue "Guide me step by step" button and use the ISO step by step interview. This will ask for information off the Form 3921 and should get you to the correct answer.
Finally, use the "ISO Exercise and Hold" interview and tell TurboTax about the stock that you did not sell by year end. That will create the necessary ATM adjustment, though you may not be subject to AMT.
Tom Young
