1099-B vs W2

[Patrickt80]

I left a job in 2020, and was given stock shares in the severance package. I sold those in 2022.  Fidelity sent me the 1099-B, which showed total proceeds and cost associated with selling the shares.  So I filed my return a few days ago.  Just got a w2 from this prior employer that shows the total proceeds in box 1 as wages, and then shows federal and state withholdings in boxes 2 and 17.  My question is do I need to file an amended return since I entered the proceeds/income from the stock sale already with the 1099-B? And if I do, won't adding that w2 wind up counting as double the income/proceeds from the stock sale?

[JohnB5677]

That depends.  

• What did you use for a cost basis when you entered the 1099-B. 
• In addition to the fees listed on the 1099-B, the Basis should have included the fair market value of the shares when you originally received them.
• If it does, you do not have to amend.
• If it doesn't, you will have to amend your return.
• The change will be to the 1099-B section of the return.

[Patrickt80]

For the cost basis I entered in what was in 1e, $408.85.  I understood that to be the fee for the sale of the shares.  The proceeds were $3836, cost/other basis was $408.  Net was 3427 which matches what's on the W2 in the wage box.  Then the federal and state deductions were applied to the 3427.

[GeorgeM777]

Your cost basis is what you paid out-of-pocket for the shares, or it is the value of the shares on the date they vested with you.  Given that your W-2 reflects the net proceeds from the sale, it would appear that if you amend your return to add the W-2 wage income, then you will be double-counting this income.  Moreover, if the net proceeds are not capital gain (which is what appeared on your 1099-B), but rather wage income (which appears on your W-2), then you would need to amend your return to report the income correctly, and also because capital gain income is taxed at a different rate than wage income.   

It is not clear what type of stock you received.  For example, when an employee receives Restricted Stock Units (RSUs), the value of those shares on the day they vest with the employee is considered a form of income and gets reported on the W-2.  The company will deduct the necessary taxes, i.e., federal and state withholding.  When the employee sells the shares, the employee needs to determine whether they have a capital gain or capital loss.  The employee does not have to worry about reporting the value of the shares on the vesting day because the company has already done that.  

Do you know if your shares were considered RSUs? 

@Patrickt80

[Patrickt80]

they were RSU's as far as I know, they were included in my initial offer letter with the company.  I was only at the company a few months in 2020.  The shares vested in 2021, however the company was doing an IPO and I couldn't sell them until 2022.  The 1099 says there was a short term gain.  The way it seems to me is basically I didn't include additional federal and state taxes that were withheld from the W2, but I did include the info from the 1099, so if anything, filing an amended return would result in an additional refund.  

[GeorgeM777 · Accepted solution]

Generally, when shares vest, the employee has the right to sell them or hold them.  There are no conditions or limitations in place.  In your situation, if you could not sell the shares until 2022, even though they had vested in 2021, then the value of the RSUs was probably not included in your W-2 for 2021 because of the limitations on your ability to sell them. 

It seems now that you should amend your 2022 return to remove the 1099-B information that you had previously entered.  Then, enter the wage income as reported on your W-2.  You should also include the federal/state withholding if that does not automatically populate.   Lastly, you need to determine whether you had a capital gain or capital loss on the sale of the shares.   While the 1099-B may reflect a short-term capital gain, you want to make sure that the basis/cost as reported on the 1099-B is accurate.   Your basis/cost in the RSUs is going to be what's reflected as wages on your W-2, plus any out-of-pocket amount you may have paid for the shares.  If there was no out-of-pocket payments, then use the amount on your W-2 as the basis.  Calculate your gain/loss using that basis/cost.  

If you must make adjustments on what you report versus what the 1099-B reflects, you can enter such adjustments into TurboTax in the same section where you previously entered your 1099-B information. 

@Patrickt80

[Patrickt80]

Thank you so much for your help!