Where does TurboTax Premier put my ESPP Ordinary Income on the 1040?

[millgarten]

Hi,

I sold 3 lots of qualifying disposition ESPP shares in 2021.  In addition to realizing a Long-Term Capital Gain (LTGC), my employer gives a 15% discount on ESPP purchases, and does not withhold taxes to cover this discount. 

According to this TurboTax article  , the 15% discount should be reported as “ESPP Ordinary Income” (I’ll say “EOI” for short) on line 7 of the 1040, and the LTCG should be reported as investment income.  I’ve entered the ESPP sales into TurboTax using full questionnaire prompting.  TurboTax should add the EOI to ordinary income, then adjust share cost basis upward (so the EOI isn’t taxed twice) before calculating LTCG.  I do see where TurboTax did the cost basis adjustment and LTCG calculation, but I don’t see where TurboTax adds the EOI to my income.  I was able to bring up a 1040 view by following these instructions .  Line 7 says "Capital gain or (loss). Attach Schedule D if required", and it has my capital gains filled in there, which I assume are just the long-term capital gains.  So did the TurboTax expert who answered in the first link (see above) get it wrong?   Is line 7 really where EOI should be reported, if so how to do that when LTCG is already there??  Can you help me find where TurboTax puts the EOI on my tax return?  Do I have to fill that out manually, and if so, how? 

I tried navigating to my Schedule D (I found these instructions, and these additional instructions) .  I'm told in both cases to "Search for Schedule D".  I assume this means click the magnifying glass icon on the upper right.  Doing so gives me a "Search questions, keywords or topics" dialog box on the right-hand side.  When I type "Schedule D" into the text box, I am not presented with a "Jump to Schedule D" search result.

[millgarten]

apparently the 15% discount IS added to my total W2 wages/earnings, although I never saw it clearly shown as a line-item income addition on a pay stub.  Anyways, if it's already covered by W2 wages then no further action is needed. 

[GeorgeM777]

No, the ESPP ordinary income will be reported on line 8 (other income from Schedule 1, line 10) of Form 1040, assuming it is not already reported on your W-2.  Your ESPP ordinary income may be reported on your W-2.   Sometimes if the employee effects a same day purchase and sale, the discount will be reported as ordinary income on the employee's W-2; however, when a sale is done after the purchase date, then the employee will have to review their W-2 carefully, or speak with their company representative, to determine whether the company has included the ordinary income aspect of their ESPP on their W-2.

Schedule D is where you will report any capital gain or capital loss in connection with the sale of your ESPP shares.  You may also have to report the sale on Form 8949 Sale and Other Dispositions of Capital Assets, if the cost basis was not reported to the IRS.  

If you want to use a jump-to link to return to your investment sales summary, enter 1099-B in the search bar.  Then click on the jump-to link.  Schedule D and Form 8949 will be populated based on your responses to the questions in this section.  

If you want to add your ordinary income from your ESPP to your return, you can add such income as "other income" on your tax return.  To enter your ordinary income as other income, follow these steps:

1. go to Income & Expenses,
2. scroll down the page to the last item Less Common Income, select Miscellaneous income,
3. then from the list select Other reportable income. 
4. you will have to enter the amount you earned plus a short description. 

If you are using TurboTax Online, here are the steps to follow to preview your Form 1040 and see the amount on line 8:

       Open or continue your return.

1. Select Tax Tools in the left menu (if you don't see this, select the menu icon in the upper-left corner).
2. With the Tax Tools menu open;
3. Select Tools.
4. Next, select View Tax Summary in the pop-up.
5. Then Preview my 1040 in the left menu.
6. Select Back in the left margin to return to the page where you left off. 

@millgarten