"Why am I showing proceeds from exercised stock options twice in wages and capital gains on 1040?"
Short answer: because you are using the wrong basis to report your sale of stock.
Longer answer, and how to fix things:
When you sell stock acquired via an employer stock incentive program your basis for the sale is the sum of:
Any amount you paid to receive the stock, which might be $0, plus
Compensation income created either by the acquisition or sale of the stock
The compensation income created by the acquisition or sale of the stock, (different stock options have different rules here), should be included in your W-2 and reported to you in either Box 12 or Box 14.
If the sale is "covered" - the broker reports basis to IRS - then since 2014 brokers are only required to report the "purchase price" element of the sale. The basis reported by the broker omits the "compensation" element of the sale and therefore the "compensation" amount gets reported twice if you enter the 1099-B as it reads: once via the W-2 and then again as an overstatement of gain on the sale of the stock.
Clearly the "fix" here is to add back the compensation element to the basis of the stock being sold. Of course if the sale is not for all of the stock received under an employer stock incentive plan award, you then you need to convert the compensation element to a "per-share" figure which you use in reporting the sale.
If the 1099-B is reporting the basis to the IRS and is not using the correct basis then enter the 1099-B as it reads on the default 1099-B entry form but 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 included the compensation per share)
TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.
Tom Young
NOTE: TURBOTAX CHANGES THE SECURITY SALES INTERVIEW JUST ABOUT EVERY SINGLE YEAR. THE INSTRUCTIONS ON "HOW TO FIX" THE BASIS REFLECT THE STATE OF THE INTERVIEW FOR TAX YEARS 2016 AND 2017.
