Once again Turbotax appears to allow double counting of employee stock purchase plan proceeds already reported in W2.

[TomYoung]

TurboTax several years ago abandoned the old interview where for each and every sale you had to go through a long and intensive interview where the question was asked if the stock was acquired via some sort of employee stock plan.  Now you are encouraged to be a simple "fill in the boxes" data entry monkey and YOU have to recognize that the stock you are selling, by its very nature, requires more than that.  A fairly recent change by the IRS which now allows broker's to report ONLY your "out of pocket" cost basis and not the correct cost basis - which includes the compensation - has made this situation worse.

After you enter the basic 1099-B information on TurboTax's default entry form, wrong broker-reported basis and all, there are two blue buttons that are available to you and two ways to get that basis corrected.

The easiest way by far, if you know your correct basis and the compensation HAS been reported on the W-2, is to simply click the blue "I'll enter additional info.." button and on the page that opens up, enter the CORRECT basis.  That's it.

The second way of dealing with this situation, one that I generally don't recommend if you know your correct basis and the compensation has been reported on the W-2, is to click the "Guide me step by step" interview.  That interview DOES ask about whether the stock is employer stock and under which program - SRU, NQSO, ESPP, etc. - it was acquired.  That's interview, properly conducted, will also get your basis corrected.

Tom Young

[KittyM]

You need to look for the blue link that says What if I sold employee stock? on the entry for your ESPP sale from the 1099-B.  To get to the right location,

• In your Federal return, choose Wages & Income
• Scroll down to Investment Income and Show more
• Start or Revisit Stocks, Mutual Funds, Bonds, Other
• Edit the sale 
• On the page "Tell us about your Brokerage 1099-B" choose the radio button for "I'll one sale at a time."  
• Fill in your information and look for the blue link at the bottom which says What if I sold employee stock?  Click on it  and complete the interview.

Generally, the final amount will be a small loss or gain.  This is the gain or loss on the sale of the stock after deducting the price you paid for it, as with any other stock transaction.

[f412xb70]

Thank you @TurboTaxKitty.  The software fails to guide the user to avoid double taxation on this issue.  I just happened to know about the issue, and anyone could easily import their 1099 data and miss this fault in the software.  I can't believe Turbotax misses this year after year.  Also, the gain is already included in the W2.

[f412xb70]

@TurboTaxKitty -- your guidance worked.  You just saved me $2800.  Thank you.  Others beware and heed the advice.

[KittyM]

@f412xb70 My pleasure.  Is there anything else I can do to be helpful?

[f412xb70]

My W2 clearly states I contributed $24K toward retirement accounts.  TT has inexplicably reported I contributed $24, 400.  I dealing with that perplexing question.

[Sd-05]

In case it helps people, for the desktop version, turbotax 2020 premier on Macintosh, the software doesn't work correctly when you click the option to input all the data yourself (what Tom Young recommends doing).  It will confirm the adjusted basis, tell you that it adjusted it for you, but then not actually adjust anything. In other words, double counting still occurs.

However: The other option (then tomyoung doesn't generally recommend) does work.

This is the option where it walks you through everything (using your 3922).

[Sunshine 58]

I have a similar issue.  I am able to avoid the double tax but I get an error message in my federal review.

Here is my story - 

My W-2 wages includes an amount in box 12 with code V (income from exercise of nonstatutory  stock options) of $17,088.60.  The federal taxes paid on these options also appear on my W-2.  The options were granted to me at no cost on 9/1/2010.  I have sold the same type of options in previous years using TT with no issues.  The only thing different in 2020 is that the brokerage house has changed and I am now able to download the 1099 from the new brokerage house.

When I download the option from my brokerage account the income is appearing from my W-2 and in schedule D.  How do I correctly list this amount?

If I go into TT and choose yes, this is stock that was acquired through an employee stock purchase plan and on the next screen choose NQSO, same day sale, date sold 6/1/2020, sold 100 shares, the total proceeds screen tells me 100 shares x $199.93 ( selling price per share) = $19,993 (total proceeds), from one grant lot, next screen exercise price $200.00, options granted 9/1/2010, 100 shares exercised, next screen net sales price $19,993, price paid $20,000, compensation income 0, cost basis = $20,000.00  - $20,000, short term loss = -$7.

When I do the review it says 1099-B worksheet line 18 column e should not be more than the FMV/share on exercise date.  It lists e exercise price per share box 3 200.00, g fmv/share on exercise date box 4 199.93.

The 1099 lists box 1A – (the company name), quantity sold – (100), date acquired box 1b – (6/1/2020), date sold box 1c – (6/1/2020), proceeds box 1d ($19,992.60), cost or other basis box 1e – ($2,904.00),

Box 1f – (0), box 1g – (0), gain amount $17,088.60.

Looking at the brokerage sale paperwork it says – trade date 6/1/2020, quantity 100, price $200.00, principal $20,000, commission $6.95, fee $0.45, net amount $19,992.60.

To me everything appears correct except I get the error on the federal review.

[MarilynG1]

@Sunshine 58 You don't have to use the Employee Stock Option interview to report your stock sale if you are having review issues.

Just enter your 1099-B and check the box to indicate 'cost basis is not correct' and enter the correct Cost Basis.

Click this link for more info on How to Enter 1099-B for Employee Stock.