ESPP ETrade cost basis correction - TT rounding mismatch with ETrade Supplement

[jackkgan]

Hi there,

I have RSUs and ESPP sales via E*Trade from my employer. The cost basis shown in Turbo Tax (imported from  E*Trade 1099-B) shows incorrect value. I understand that I need update the cost basis to the Adjusted cost basis from E*Trade supplement or from Release confirmation.

I remember that when I entered this last year, I did not update the adjusted cost basis directly, but went through the Turbo Tax screen "I can't find it and need help", which then prompted me to enter values from my E*Trade Release confirmation for RSU and 3922 form for ESPP.

Please confirm if there any difference between :

a) updating the adjust cost basis for cost basis directly from E*Trade Adjusted cost basis using the edit bulk button of Turbo Tax in the "Review your MORGAN STANLEY CAPITAL MGMT sales"OR

b) Going through the route of choosing "I can't find it and need help" and entering values from my E*Trade Release confirmation for RSU and 3922 form for ESPP. 

When the 2nd option above is used, Turbo Tax rounds the Cost (Adjusted)  Basis, so the gain/loss in the ETrade supplement is slightly different from the values Turbo Tax displays in the screen "Review your MORGAN STANLEY CAPITAL MGMT sales" With each sale contributing to some difference due to TT rounding , the tax calculation is different between the 2 methods above. Is that difference ok and acceptable by IRS?

Please confirm which of the above 2 method would be more accurate and if there is any advantage of option 2.

Example:

E*Trade Supplement shows below (option 1 above by entering adjusted cost basis directly using bulk edit)

Total Proceeds: 24,167.80

Adjusted cost basis = 24,057.76

Gain = 110.04

Turbo Tax shows (option 2 above of entering the values from Release confirmation letting TT calculate)

Total Proceeds: 24,167.80

Adjusted cost basis = 24,058

Gain = 110.80

Thank you!

[AmyC]

Either method is fine. You just need to be sure that you add the missing basis - your employer discounted 15% along with any purchase or sale costs.

The 3922 is just to help you with entry but now you are a pro and don't need the program to do extra jumps. That is all just background stuff. The sch D is what goes to the IRS with the sale and basis. As long as sch D is correct, you are good! Great job remembering!

[jackkgan]

Thank you for your kind response and for confirming that either method is ok.

Please confirm if you also meant that the difference in gains/losses that's happening because Turbo Tax is rounding the cost basis via the 2nd method above during it's computation which is not matching the gain/loss in the E*Trade supplement is acceptable by IRS.

[MarilynG1]

Yes, either method is acceptable to the IRS; just document which method you used.

Although there has been much discussion since 2020 about TurboTax rounding at the transaction level, rather than the totals, this is how the program currently works and has been acceptable to the IRS, since they receive copies of 1099-B's as well. 

Here's more info on RSU's and Taxes and Employee Stock Purchase Plans. 

@jackkgan