ESPP question

[Anonymous]

I purchased stock shares from my employer over many years between 2000-2008. I kept the shares there until last year, moved it over to an investment company, and then sold some shares. Now I'm having to fill out TurboTax and the section for ESPP is so difficult. I don't know how to fill it out. First day of offering period? I don't know. Date purchased? Various. Market price on grant date? What is that? Purchase commissions? I have no clue whatsoever. 

I feel like not selecting the ESPP option and then I don't have to answer these questions. Can anyone help? I was able to average out the cost basis - hurrah for that.

[GeorgeM777]

Given that you purchased shares during the period 2000 - 2008, your ESPP sales are all qualified dispositions.  A qualified disposition is one in which the shares are sold at least one year from the purchase date, and at least two years from the offering date (the date the offering period begins).  That is why TurboTax inquires about purchase dates and offering dates.  

The grant date relates to your former employer's offering period.  The offering period has a beginning date and an ending date, and generally on the ending date is when employees purchase shares.  However, each company is different, and shares may also be purchased while the offering period is still open.  A public company's annual or quarterly financial reports may contain information about a company's ESPP program, and you might research this information online.  These reports would be the company's Form 10-K (annual) or Form 10-Q (quarterly).

The reason why TurboTax asks about the market price on the grant date is because your ordinary income part of your ESPP sale is based on the market price on the grant date.  Thus, when you enter the market price on the grant date (i.e., the beginning of the offering period), TurboTax will be able to calculate the amount of your ordinary income as well as the correct amount of income tax to assess against that ordinary income.    

Commissions are a form of a sales charge.  Did you purchase your ESPP shares through a brokerage firm?  If you did, then your brokerage statement should contain your sales commissions.  However, if you did not, or don't remember, your former employer's financial statements may contain information about commissions.  If you can get this information from your company, then you will have an amount to enter, but if not, given the passage of time, then perhaps the only option available is to leave the commission field blank. 

[Anonymous]

Thank you.  I don't know how any of these dates (Grant Date, Purchase Date, Offering period) could be just one date when I purchased shares every paycheck for all those years. So if I sold 1000 shares last year, It would have been purchased over many pay periods.  I don't think there was any commission since I purchased directly from the company. 

[LindaS5247]

You would most likely only have commissions if you were involved with a brokerage firm.

Usually, you make contributions to a stock purchase fund for a certain period of time through payroll deductions. At designated points in the year, your employer then uses the accumulated money in the fund to purchase stock for you.

In many plans, the price that you pay for the stock is the stock price at the time you started contributing to the fund, or the stock price at the time your employer purchases the shares on your behalf, whichever is lower, with a discount of up to 15%.

• Either way, you get to buy the stock at a price that's lower than the market price.
• Your discounted price is known as the offer or grant price.

When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income.

• If you hold the stock for a year or less before you sell it, any gains will be considered compensation and taxed as such.
• If you hold the shares for more than one year, any profit will be taxed at the usually lower capital gains rate.

Click here some for an article that explains the Disqualifying Disposition in full with examples.   

Click here for a video from TurboTax on entering ESPP sales.
 

[Anonymous]

I checked with my ex employer and was told I was not charged any commission fees nor was the stock sold to me at a discount. Thank you so much for your help.