earned income from the discount of qualified ESPP and ROTH contribution

[evanlee2019]

I waited over 2hrs from IRS help and got nowhere but a disconnected line.

From what I understand from an earlier discussion below, the discount from a qualified dispostion of qualified ESPP counts as earned income that counts as "compensation" towards a ROTH contribution. I.e. is

the following still true? 

https://ttlc.intuit.com/community/taxes/discussion/is-income-from-my-espp-stock-sale-considered-earn...

[RobertB4444]

As long as the amount is reported to you in box 1 of a W2 then it absolutely still counts as compensation.

@evanlee2019 

[evanlee2019]

Thank you! but my ESPP was over 10 years old and I don't think I ever received a W2 from my former employer which may no longer be in business. I have to create a W2 myself?

[RobertB4444]

No.  You have to contact your former employer and request that they issue one to you.  If they are out of business you may be out of luck.

If it is not reported on a W2 then it does not count as earned income.

@evanlee2019 

[shubham1310]

@RobertB4444 I didn't get the ESPP discount added to my W-2. I am getting this question in this form "Compensation Income from Employee Stock Transactions" asking if this is earned income. Will that be "no" then, because it wasn't added to W-2?

[AbrahamT]

Just to clarify, in which form are you getting this question? ESPP discount "is" earned income regardless of whether it is included in the W2 wages or not.  It would be reported in this screen

 

You would start off by going into Personal Income/

then all the way at the bottom, hit Misc. income

then "Other income not already reported on a Form W2 or 1099

then on next screen, Did you receive "Other Wages," hit yes

then hit Continue, continue, continue until you get to this screen

 

Next screen, enter Source of Other Earned income, select "Other'

and then back to the 1st  screen

 in which you'll put the Description which is Espp discount and amount.

Then click "Done"

[shubham1310]

@AbrahamT @RobertB4444 

So I am using the web version of Turbotax and I put the ESPP via the 1099-B where I adjusted my cost basis and then selected the discount not included in W-2 option. All was good and well and then in the federal review it asks me this:

This shows up under this form "Summary of Compensation Income From Employee Stock Transactions:

G Keep for your records"

I think this is the section where it needs this information:

It already has amount 0 in the (f).
I am not sure what does the "Earned income?" mean here

[AbrahamT]

Does the Espp discount show up under that earned income column?

[shubham1310]

@AbrahamT I have plan type (c) as ESPP, then the total discounted amount in (d), 0.0 in (f) and then the total amount again in (h)

The Earned income column has two options Yes and No (and not amount). This is the same as what it wanted me to select at the top of page:

[AbrahamT]

In that case, you would select Yes

[shubham1310]

@AbrahamT 

I understand that for me it would be earned income.

Just for my understanding, when can it be non-earned income? 

[RobertB4444]

ESPP discounts are always earned income as they are considered compensation.  The confusion comes from the sale of ESPP stock which can either be capital gains or regular income.

@shubham1310 

[shubham1310]

@RobertB4444 

Not really sure what this means "The confusion comes from the sale of ESPP stock which can either be capital gains or regular income." for me as the money on that page is the discount I was given.

I will just say earned income yes.

[RobertB4444]

That is the right answer.

@shubham1310