ESPP tax question

[amt_blues]

I sold ESPP shares for the first time in 2021. These are qualifying shares purchased in the 1990s, and all sold with long-term gain. Situation 3 in this article is exactly my situation:

https://turbotax.intuit.com/tax-tips/investments-and-taxes/empl[product key removed]ase-plans/L8NgMF...

I don't recall if the discount of these shares were reported on my W-2 forms for the years they were acquired. These shares were not recorded as ESPP at the brokerage. After the sale, they sent me a 1099-B form with Dates Acquired and Cost Basis for all the shares sold. I have no record of 3922 or W2 forms from the employer, as mentioned in this video:

https://www.youtube.com/watch?v=66Gzu9vZqb4

I will be using TurboTax Premier for the 2021 filing. Questions:

- Will TurboTax guide me through how to enter all the information, including the shares' Offering and Exercise dates and prices, etc. to calculate the company discount?

- Will the company discount be added to the 1099-B cost basis?

Thanks in advance.

[DavidD66]

Yes, TurboTax will guide you through entering all aspects of your sale of ESPP stock.  In addition to the long term capital gain, it will calculate the compensation that needs to be reported, and add it to line 7 of your W-2.   Your company would not have reported any compensation on your W-2 when you acquired the shares.  Compensation is only realized (and reported) when you sell the shares.    

[amt_blues]

Thanks for the response and explanation.

A little confused about the W-2. After the sale, I did not receive a W-2 from the company. I left the company decades ago, and I'm not sure if they have my current contact information.  Is this a problem I need to resolve?

[GeorgeM777]

No, it will not be a problem.  To follow-up on the comments from @DavidD66, even if you don't have a W-2 from your employer you can report this amount as compensation income on line 8 of your Form 1040.  Line 8 on Form 1040 is the line for "Other Income."  Follow these steps to report the ordinary income aspect of your ESPP as other income:

1. Go to Personal
2. Select Personal Income
3. Scroll down the page to Less Common Income
4. Select Miscellaneous Income
5. Select "Yes" when asked if you received other taxable income.
6. Enter the name and amount.

If you are using TurboTax online, the process is essentially the same as the above steps.  

@amt_blues

[amt_blues]

Thanks. I have the Premier CD, and running on my Win10 desktop.

Will TurboTax guide me to enter line 8 on Form 1040? Or do I have to enter it manually?

At what point will TurboTax guide me on the ESPP sale?

[GeorgeM777 · Accepted solution]

Yes, TurboTax will enter the other income on line 8.  You will not need to manually enter the other income appearing on line 8 of Form 1040.   Follow the steps in the previous post to enter the line 8 other income.  For the ESPP transactions, follow these steps:

1. go to Wages & Income under Federal Taxes. 
2. At the page "How do you want to enter your income?" select "I'll choose what to work on." 
3. Scroll down to Investment Income, and select Stocks, Mutual Funds, Bonds. 
4. Answer the questions accordingly.
5. You will get to a page Was this a sale of employee stock?  Select Yes.
6. You will then see the page What type of employee stock is this?  You will see the option to select ESPP.
7. Continue through the section responding to the questions as they appear. 

@amt_blues

[amt_blues]

Thanks. I have already imported the 1099-B from my brokerage, and have no problem following steps 1 through 6. The 1099-B reported several lots of shares (from the same company) were sold. All the lots, but one, are ESPP shares. Very glad that TurboTax will guide me through each lot separately.

However, I'm unsure how to answer the question "Which job did this stock come from?" If I choose the option "Choose which job this stock is from", there is a blank box which I cannot enter any text. If I choose the other option "It's from another job", I can enter "XYZ Corporation" in the Employer box. How should I proceed?

Thanks for your patience.

[GeorgeM777]

If clearing cache and cookies does not solve the issue, try entering the name of the company whose shares you purchased through the ESPP even though the question requests the name of a different company.  

@amt_blues

[amt_blues]

After entering "XYZ Corporation" as "another job", TurboTax guided me through to compute the compensation and added that to the cost basis. When I edited the other lots, "XYZ Corporation" would appear in the blank box. Done!

Thank you so much!

BTW, will I receive a W-2 from XYZ Corporation? Will it matter?

[GeorgeM777]

No, given that you are no longer an employee with the company, you will not received a W-2.  Employers are obligated to send W-2s to their employees, and the company is no longer your employer.  

No, it will not matter that you do not have a W-2.   Moreover, you don't need a W-2 to report the transactions.   

@amt_blues

[amt_blues]

In all the ESPP articles I have come across, a W-2 from the employer is referenced. However, none of them addressed a situation like mine, i.e. no longer an employee and will not get receive a W-2. Hence my confusion and concern. Now it all make sense.

Thanks again.