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jdub609
New Member

ESPP Stock Non-dividend distributions

How do I account for non-dividend distributions on stock sold under an ESPP in Turbo Tax.  They are supposed to reduce the cost basis of the stock.  I have to enter data manually.  How do I know that all calculations have come out right (Ordinary Income, Capital Gains, etc.)
4 Replies
TomYoung
Level 13

ESPP Stock Non-dividend distributions

Are you dealing with Qualified or Nonqualified sales here?
jdub609
New Member

ESPP Stock Non-dividend distributions

Qualified
TomYoung
Level 13

ESPP Stock Non-dividend distributions

Mechanically I'm not entirely sure I know how the non-dividend distributions play into the calculation of "compensation" that's used for Qualified sales.

The compensation and addition to basis for qualified sales is the lesser of:
     1) The discount percentage applied to the GRANT date FMV
     2) Actual gain, i.e., proceeds minus what you paid for the stock

Taking that literally it seems like you would first determine the compensation and basis addition "by the book" ignoring the non-dividend distributions.  Having determined your basis it seems like you'd then subtract the non-dividend distributions from that for the basis you're going to use in reporting your sales.

You might be able to figure out how to finesse the Form 3922 information to get this all to work but the straight-forward method would be to simply enter the sales using the default 1099-B input form either simply entering the correct basis, (in the situation where basis is NOT reported to the IRS) or correcting the reported basis (when basis IS reported to the IRS).

Then you could report the compensation income directly by:

Starting the "Miscellaneous Income, 1099-A, 11099-C" interview.
Starting the "Other income not already reported on a Form W-2 or Form 1099" interview.
Answering "Yes" on the "Other Wages Received" page.
Entering $0 on the "Wages Earned as a Household Employee" page.
Entering $0 on the "Sick or Disability Pay" page.
Answering "Yes" on the "Any Other Earned Income" page.
Ticking "Other on the "Enter Source of Other Earned Income" page.
Entering a description and an amount on the "Any Other Earned Income" page.
 

Tom Young

jg1
New Member

ESPP Stock Non-dividend distributions

Just to clarify, the additional reporting of the compensation income is only required if it was NOT already reported on the W-2. In many cases, this compensation income is reported on the W-2 for the year where the stock was sold, and so does not need to be separately reported.

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