Adding W2 Box 12a amount to 1099B cost base for nonqualified stock option exercise: how to handle Form 8949?

[Tax2019Pay]

Turbo Tax says:

"Taxpayers do not need to submit Form 8949 if:

• They received a Form 1099-B that shows that the cost basis was reported to the IRS, and
• The form does not show a non-deductible wash sale loss or adjustments to the basis, gain or loss, or to the type of gain or loss (short term or long term)."

My question is in the case of nonqualified stock option exercise, company also reported the gain from the stock option exercise on W2 (including in Box 1 and also listed on Box 12a with "V" - non-qualified stock option".  To avoid being double taxed, one needs to add the amount to the cost base in 1099B.  If you add the Box 12a amount the cost base in 1099B, do you then need to submit Form 8949?

Can the IRS easily figure out your final cost = 1099B cost base + W2 Box 12a amount without you explain it?

[DavidD66]

When you enter your 1099-B, you will initially enter the cost basis shown on the 1099-B.  You will then indicate that you need to adjust the cost basis, and you will enter the value of the stock at the time of exercise.  For non-qualified stock options, this amount is also the amount you paid for the stock plus the amount of the bargain element.  The bargain element is the amount included in wages on your W-2 and reported in Box 12 with Code V.

[Tax2019Pay]

Hi DavidD66: Thanks.  Since the stock option exercise/immediate sale is labeled as "short-term covered" on 1099B and there is no special adjustment.  How do I enter in Turbo Tax if I summarize a few lots of the same option grant exercise?  None of the letter codes for adjustment fit for adding W2 Box 12a amount? My understanding is in this case, I can summarize the various lot using total proceeds and total cost base without generating Form 8949.  I am confused where in TurboTax and how to add W2 Box12a amount?

[Tax2019Pay]

Do I just leave the "List All Adjustment Codes" empty? Should I also enter the W2 Box 12a amount in negative numbers as an adjustment"

[DavidD66]

After entering the details of your sale according to your Form 1099-B, click on Continue.  The next screen will ask about "less common items" on your 1099-B, there shouldn't be any, so click on Done.  The next screen asks "Was this a sale of employee stock?"  Answer "No" and click on Continue.  Note: You only need to answer Yes to the question about having an employee stock sale if you don't know the cost basis and need help finding it. The next screen says "Select any less common adjustments that apply".  Check the box next to "The cost basis on my statement is incorrect".  This will cause a box to appear to enter the corrected cost basis.  As I mentioned above, your corrected cost basis is the value at the time you exercised your options.  You don't enter the amount from Box 12, as that is only the amount of ordinary income included on your W-2.  It does not included the exercise price of the stock, which is the amount you paid for it.  The amount you paid, plus the amount in Box 12, Code V is your cost basis, and is should be entered as your "Corrected cost basis" in TurboTax.