Extremely confused with ESPP. Gone through TT Full Service and can't understand how share sale to cover cost is being processed.

[JS1010]

When my ESPP vested, a proportion of the shares were automatically sold for taxes. I haven't sold the remainder. And the sale proceeds went directly to IRS - don't think these figures are included in my W2 federal tax paid or anywhere else on my W2, nor is the income - should they be?

It looks like the sale is being included in my total income when an advisor has processed 1099 but I feel like I am being double taxed as my return is including the sale as income + my W2 income but isn't recognising that I have paid a signficant amount of tax when these shares were sold.

Please help - I am new to US taxes so struggling

[ThomasM125]

Your W-2 should report in box 1 (Wages) the value of the discount you received for the stock you sold to pay taxes.  You will also get a Form 1099-B reporting the sale of the stock. Most likely, the cost basis reported on the 1099 won't take into consideration the income reported on your W-2 form, so you may need to adjust the cost basis when you enter the 1099-B form in TurboTax. Since you sold the stock almost at the same time your acquired it, the capital gain on sale should be minimal.

When you enter the stock sale, choose the ESPP for type of sale. When you enter the sales proceeds and cost basis, click on the box that says The cost basis is incorrect or missing on my 1099-B:

 

On the next screen you can enter the correct cost basis if you know it, or have TurboTax help you determine what it is:

You can use Form 3922 that you should have received to find the numbers to calculate your cost basis. If you can determine what your total discount amount was upon acquisition of the shares, you can divide that by the number of shares acquired and that will give you the discount per share. If you multiply that by the number of shares sold, you can usually add that to the cost basis reported on your Form 1099-B and that will give you the correct cost basis to be reported for the sale of the shares in the current year.