Exercising a NQSO can't be handled by the TurboTax software without over-riding the tax forms and negating electronical filing. This deficiency should be corrected by TurboTax software engineers This should be fixed

[ITTGus]

Thank you for responding.   But, to be clear.  I am working with NQSO's.      It is important to properly report what I have.  Plus, there are differences between RSU's and NQSO's.  There should be no reason to game the software to make the numbers work.   

When you exercise non-qualified stock options, you recognize ordinary income equal to the spread, which is the difference between the amount you paid for the stock (award price) and the fair market value of the stock at exercise.  Taxes are required to be withheld on this spread.  The income and taxes withheld on these transactions are included on your Form W-2.  Since you pay taxes on the ordinary income at the time of exercise, you do not have to pay capital gain taxes on that income upon exercise.  When you sell option shares, the financial institution is required to report the proceeds from the sale of your option shares and cost basis of the shares to you and the IRS on Form 1099-B.   

This software has a selection for NQSO, this is what should be chosen.   As @njenear pointed out, you need to correct the cost basis and need to report an adjustment to the gain (or loss) on Form 8949.   Since TT will not allow an override, we need a means to choose the negative adjustment value (g) and ensure the proper code is assigned (f).    

[ITTGus]

@njenear I am not 100% certain here.   Form 8949 should be reporting the information as carried over from 1099-B.   You obtained your goal of showing no capital gain from this sale, but your amount of adjustment will not be negative.  I reviewed what you posted and tried to repeat a positive outcome.  However, I have not been able to find a reasonable means with the TT prompts to get my 8949 to properly show a negative adjustment (g) , with 0 gain (h)     The proper code, "B", if filled in (f).     By adjusting the cost or other basis (e), this number will not match 1099-B.   Not sure how this will work in the electronic filing cross checks.      As you stated in your original post, this worked as it was supposed to in prior versions and something changed this year.  I have reported NQSO exercises in TT for prior years and have not had this problem.   TT needs to fix their software. 

[Neil-san]

Turbotax: are you listening?  I too am having this problem.  NQSO's were handled well in prior versions.  This might be the last time I use TT.

[njenear]

I agree that TT 2024 should go back to the approach used in TT 2023 and earlier versions- they need to fix 2024 TT.  However the method that I posted yesterday (Feb 17) and subsequently noted as the best answer, that is, adjusting the cost basis reported on your 1099B upwards to reflect your gain, works equivalently to the 2023 TT approach for cashless NQSO exercises  and enables you to file electronically.   Furthermore, I went back and checked my 2023 form 8949 and it looks identical to what this method produced for my 2024 form 8949.  You are correct that column 1(f) in form 8949 will show a code B using this method, but this is the correct code AND the proceeds (1d) and cost (1e) reflect that shown on my 1099B, but  the adjustment in 1(g) was a negative number that matched precisely the negative of the  'wages' (i.e. the cashless NQSO gain)  reported on my W2.  So it does NOT double report the gain and avoids you wrongly paying  much higher taxes.  

So repeating what I posted yesterday and hopefully helping others avoid this nasty pitfall in 2024 TT:

What you need to do is to chose NQSO but adjust the cost basis.  So as you enter or review each NQSO sale, under box 1e (Cost basis), choose  "the cost basis reported is incorrect  or missing on my 1099-B" and hit continue.  In the next screen, choose "I found my adjusted cost basis" and enter the adjusted basis as this example explains:

Example for a Non-Qualified Stock Option:

Say it's worth $10. And your exercise cost is $1. You perform a same-day exercise and sale. You made $9.

This $9 is taxed as wages and will show up on your W-2.

Since there was a stock sale, it ALSO shows up on your 1099-B as a $9 gain. 

A $9 gain in two places could lead to a maximum tax rate of over 100% if reported twice.

In this situation, the cost basis needs to be ADJUSTED up from $1 to $10. An adjustment of $9 since you're already getting taxed on that amount as wage income

This example is taken from the  method described at this URL:

https://www.modernfp.com/blog/doubletax#:~:text=Example%20for%20a%20Non%2DQualified%20Stock%20Option....

I tried it and form 8949 computes perfectly, showing a loss equal to the ordinary income reported on my W2.  I had literally tried the 'manual override' on this form 8949 first and was all ready to file by mail when I thought I'd try one more internet search and came up with this method.  I'd saved my 'mailed' forms  (manual override) and compared them to the forms generated using this method and they were identical.  So problem solved! 

[AlanMeyer]

I am having the same problem.  I downloaded the 1099-B for the same day NQSO sale, but am unable to access it in TurboTax to indicate that the sale was also reported as income on a W-2.  The page showing the sale details isn't appearing correctly (a portion showing "needs review" is clipped off) and when I hit continue, it takes me back to the investment income page.  I will try your work around, but this is a flaw in the 2024 edition of TurboTax that wasn't in previous versions.

[AlanMeyer]

I have used TurboTax to correctly report same day sales of NQSOs for the past nine years.  It worked fine, but this year it doesn't appear to be able to prevent the duplication of income as reported on the W-2.  There needs to be a convenient way to adjust the 1099-B as there was in previous years. 

[tkels]

TT 2024 should fix how it handles a cashless NQSO sale. I just spent a hour on the phone with TT before finding this post in the community.  Expert on the phone was not familiar with the issue and thought my taxes were being calculated correctly.  Please look into this as I have used TT for years and not had this kind of problem before.

[ITTGus]

Not wanting to insult or be rude to the OP who said they solved this question.  But the answer is not accurate..   Anyone know how to change this thread back to not solved?     I do not want to repost this question if I don't have to, and I would like ITT to kindly review, acknowledge and share intent to fix.    This thread has captured the multiple people who still have this issue (which was not present in prior years), and would like a proper fix.   Thank you.

[civilian]

Still NOT Solved. I called Intuit and was passed around several times to different support person to eventually get someone that understood about NQSO and file a bug report. Over 2 weeks and no response on the bug report.

[njenear]

TT 2024 has definitely NOT fixed the problem but the work around I described is sufficient to get you an equivalent result. I don't believe they will solve the problem with a software update until well past April 15 since no one at TT understands or acknowledges a problem. I likewise spent over 2 hours on the phone and hours on the community posts getting nowhere with their experts. 

[DavidD66]

When you report the exercise and sale of (some or all) shares of a Non-Qualified Stock Option (NQSO), I recommend that you do NOT indicate in the program that it is Company Stock. Simply report the sale as it is reported on the Form 1099-B (with the incorrect cost basis), and then adjust the cost basis to include the amount that was taxed.  Your adjusted cost basis will be the same amount as the value of the stock at the time it was exercised.  For example, if you exercised 100 shares of XYZ stock for $25 when the stock was trading at $75, you would adjust your cost basis to $75 per share.  You paid $25 per share, you were taxed on the bargain element of $50 per share for a cost basis of $75 per share.  You do not need to go through the Company Stock questions and indicate it was a NQSO stock sale.  You only need to report the correct acquisition date, sale date, proceeds, and cost basis.  Because the 1099-B cost basis is incorrect, you have to report what is on the 1099-B, and then adjust it.  And you definitely don't need to override anything.  You will be able to e-file your return.  

[njenear]

I totally agree that you don't report a NQSO as a stock sale and that you do need to adjust the cost basis to reflect the 'earnings' reported on the W2 for that sale, as I've described elsewhere and as similarly described by you.  However, you miss the point.  There are literally NO instructions w/ TT2024 explaining this and all prior year's versions of TT handled cashless NQSO seamlessly, without having to look here in the Community for answers.  You've lost the customer focus in TT2024 for NQSOs and need to re-establish it.  The step by step in all prior year's versions automatically adjusted the cost basis for a cashless sale.  Why drop that in 2024's version AND not provide any guidance on the approach for it?  It's just plain stupid.  Actually I believe it is nothing more than a greedy corporate approach to impel most users to instead 'upgrade' to pay extra for expert advice.  Stop all the add-ons and provide your customers a quality product, as in years past.

[AlanMeyer]

I was able to handle this by manually entering the stock sale information, indicating that it was from a NQSO and manually entering the adjustment amount (the profit from the sale).  I was unable to do this when I downloaded the information from the broker as TurboTax kept running me around in a circle when I tried to enter the adjustment.

I checked and the Form 8949 and the Schedule D show the adjustment, and the return passed the Federal Review.  I am assuming that the IRS won't have a problem as the W-2 shows that the income came from a stock sale and it and the broker's 1099-B show it was stock from that company that I sold.  

Unfortunately, I wasted a lot of time getting to this point.  TurboTax should be updated so that others don't waste their time or pay more than they should in taxes.

[CatMc]

I'm using  TT deskstop and upgraded to live help to resolve this issue. I spent almost 2 hours to be told to use the work around indicated here (adjusting the cost basis, meaning adding the cost basis indicated on the 1099b and the income reported on W-2 for this sale). It's infuriating that the TT "experts" would not acknowledge there was a problem.

My problem now is that no form 8949 was generated; the sale is reported  schedule D line 1a even though I have an adjustment. So, I spent another 2 hours on the phone with TT who said since there were no errors found in the smart check my return was okay.

any ideas if I will have a problem not submitting a form 8949 like all the previous years when I reported a NQSO?

[AlanMeyer]

My copy of TurboTax Premier did generate a Form 8949 and did show the manual adjustment that I entered and labeled it as Code B.  As the amount of the adjustment was the amount shown on my W-2 as "Income from nonstatutory stock options", I am hopeful that there won't be a problem.  My return was accepted and I did receive my refund.