ESPP reporting in 1040

Hello,

I was enrolled in ESPP program by my company in 2019. I got stocks at a discount of 15% from my company. I sold them in Feb 2020. I think this should be a Disqualifying disposition.

I checked my w2 and compared it with my paystubs. It looks like that the company has not shown anything related to ESPP in w2. They have not included the discount factor of 15% as well as the profit I got after selling my stock in my w2. In my case, let say the market price of the stock was 100$. I purchased the stock through ESPP discount at 85. And sold the stock at 110.

1. Does it mean that I have to report $25 in my w2 or $15

2. How should I report this earning. My thought is I can include this in schedule D with Cost basis as 85 and selling price as 110 and include $25 in section 7.

366

1 Best answer

Expert Alumni

Apr 28, 2021 2:13:26 PM

The discount amount when you acquired the stock is taxed as ordinary income, which is $15 in your example. You should enter the sale in TurboTax by following these steps:

Income and expenses
Investment Income
Stocks, Mutual Funds, Bonds, Other
Choose the 1099-B entry option and enter the sale as "One sale at a time"
Enter the sale proceeds as the amount your received from the sale
Enter the cost basis as what you paid for the stock
When you see the screen that says Was this a sale of employee stock? answer Yes and also Yes to the question regarding stock being purchased through an employee stock plan
Indicate that the sale was from a stock purchase plan (ESPP)
Work through the rest of that section to have your capital gain and ordinary income calculated and properly entered on your tax return

Expert Alumni

Apr 28, 2021 2:13:26 PM

The discount amount when you acquired the stock is taxed as ordinary income, which is $15 in your example. You should enter the sale in TurboTax by following these steps:

Income and expenses
Investment Income
Stocks, Mutual Funds, Bonds, Other
Choose the 1099-B entry option and enter the sale as "One sale at a time"
Enter the sale proceeds as the amount your received from the sale
Enter the cost basis as what you paid for the stock
When you see the screen that says Was this a sale of employee stock? answer Yes and also Yes to the question regarding stock being purchased through an employee stock plan
Indicate that the sale was from a stock purchase plan (ESPP)
Work through the rest of that section to have your capital gain and ordinary income calculated and properly entered on your tax return

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ESPP reporting in 1040