Avoidance of double tax payment on stock option sale

[Bistro1]

I bought and sold stock options in 2021 in a single-day cashless transaction.  The transaction was reported both by my company on a W-2 as income and also by the financial company who handled the transaction, as short term capital gains (1099-B).  When I put both into the TurboTax system as they are reported to me, it counts the transaction twice, once as income and the second as short term capital gains.  How do I avoid paying double the amount I should owe without "not reporting" one or the other data set.

[Whoislike]

Your company will report, as ordinary income, the difference between the stock market price and your option price.  Your broker should report the difference between the price at which you sold the stock and the market price at which you bought the stock.  In a single-day cashless transaction, you should have ordinary income reported and no gains, or a very small gain, from a short-term sale.  Sometimes the broker does not know that you are having a stock option so they will report the cost at which you bought the stock, the option price.  In Turbotax you can adjust the basis to reflect the stock market price on the day you bought the shares.  Note, sometimes there is a supplemental schedule in the 1099-B that will provide the true cost to be reported.

[Cat_mom]

I think I know what you're asking so I'll give it a go. When the stock option matures, the value of the stock provided through the options is included as income and is noted on your W-2 as income. The difference between that value and the value of the stock when you sell it has not been taxed until tax time. That difference is taxable and is what you should be paying taxes on. I forgot the name of the form that you'll get from Fidelity or whoever is managing your stock options plan but the last page should provide you with the fields to make this information clear. I hope that this helps.

[RaifH]

You will want to adjust the cost basis on Form 1099-B to reflect the value of the stock when you were able to exercise your option as @Whoislike said. If these were ISOs, you may have gotten Form 3921 from your employer or you may find the adjusted cost basis in the supplemental information on your Form 1099-B. If you can't find the correct cost basis anywhere, TurboTax will help you calculate it by determining the fair market value per share when it exercised and how many shares you received. If you sold them right away, the gain or loss should be minimal. 

To enter it in TurboTax:

1. In the Federal > Income & Expenses > Investment Income section of your return, click Start/Revisit next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)
2. Answer Yes and then select stocks. Import or enter your transactions manually. 
3. For the employer stock transactions, make sure to select Yes to Do these sales include any employee stock?
4. Enter the transactions as they appear on the 1099-B with the type of employer stock selected as the type of investment.
5. If the basis reported on the 1099-B is not correct, you will be able to adjust it to match the supplemental information provided under Adjust your cost basis to ensure your best outcome after you enter the stock sale. If you can't find your adjusted cost basis in your tax documents, TurboTax will help you calculate it if you select I can't find it and need help.