Donated (not sold) ESPP, How do I report amount taxed for Ordinary Income?

[rrmills7777]

I donated a significant amount of qualified ESPP shares from a former employer to charity this year.  I know that I can deduct FMV, but need to pay income on the discount I received at purchase.  I'm assuming I will not receive a W-2 with this income from my former employer.  I've seen conflicting information on how best to do this in TurboTax.

Since I donated (not sold) it, I did not receive a 1099-B, so there is no transaction that might get me something on Schedule 1, line 8k.  I've seen advice in turbotax to get it both to Schedule 1, line 8z and to 1040, line 1h.  What is the correct thing to do here?

[ThomasM125]

The discount is wage income not subject to social security or Medicate tax. You can enter it in TurboTax as follows:

1. Go to the Wages and Income section of TurboTax

2. Choose Less Common Income then Miscellaneous Income, 1099-A and 1099-C

3. Choose Other Income not already reported on a Form W-2 or Form 1099

4. Indicate that you had Other Wages Received

5. On the screen that says Any Other Earned Income? say yes

6. Indicate that the source of income was employee compensation not reported on a W-2

7. Report the wage income and use reason code H 

[jackf1958]

I followed the steps above, and TT entered the ESPP income amount on Form 8919 and added SS and Medicare taxes, which seems incorrect.   I think the answer in step 6 above should be "Other" for the Source of Income.    Then,  you should enter a description and an amount on the "Any Other Earned Income" page, and no SS/Medicare taxes will be added.    Agree?

[MarilynG1]

If the amount of your ESPP discount had been added to your W-2, it would have been subject to SS and Medicare tax, so this is correct. 

Here's more info on Form 8919. 

@jackf1958 

[jackf1958]

Sorry, I forgot to include the basis for my statement that ESPP income is not subject to SS/Medicare taxes.  Here it is, from IRS Pub. 15-B, p. 12.      https://www.irs.gov/pub/irs-pdf/p15b.pdf

Wages for social security, Medicare, and FUTA taxes
don't include remuneration resulting from the exercise of
an incentive stock option or an employee stock purchase
plan option, or from any disposition of stock acquired by
exercising such an option.

Agree or disagree?

[brianmartin192]

I have the same issue. Please add this to the questions when you add the charitable donation of stock so that I can add details related to the ESPP donation.

I just wanted to make sure I understand. Is this the correct list of steps I should be using (steps 4-7 updated)?

1. Go to the Wages and Income section of TurboTax

2. Choose Less Common Income then Miscellaneous Income, 1099-A and 1099-C

3. Choose Other Income not already reported on a Form W-2 or Form 1099

4. Indicate that you had Other earned income

5. Select Add on the Other earned income summary page

6. Enter "Ordinary Income on ESPP Donation" in the description and the Amount and select Continue

7. Observe the added income and select Continue when complete

[DavidD66]

Those are the correct steps to report ordinary income from qualified shares of ESPP stock donated to charity.

[brianmartin192]

Also just to be extremely clear and verbose. The amount should be added for appreciated shares is the discount amount on the shares. Here is an example for reference. 

ESPP shares, met the holding period, pre-discount price was $200/share, with a 15% discount I paid $170/share, the value on the day of donation is $300/share.

In this case the discount amount of $30/share is what needs to be reported as Ordinary Income.

So, if I donated a 100 shares, the amount would be $3,000 (100 shares * $30/share) for the "Ordinary Income" portion.

Is this correct?

[DavidD66]

Yes. If you donated the stock at least two years after the offering (grant date) and at least one year after the exercise (purchase date).  In this case you report the lesser of:

• The gross value of the stock at the time of the donation, minus the actual discounted price paid for the shares.
• The per-share discount times the number of shares.

You would report $3,000 as "Other Income" on Schedule 1.