I sold company stock & taxes were withheld, reported to the IRS and the income from this is part of my W2. Fill out a 1099B or is my W2 of reported earnings enough?

[rchilario]

it's unclear to me how to handle the selling of stock if taxes were already withheld and reflect as part of my income. Is there anything else I need to do?

[TomYoung · Accepted solution]

Yes, you need to enter the 1099-B too.  The IRS gets copies of all 1099-B's and will look to see if you've reported yours.

The secret here to avoid "double taxation" when you report the sale is the use the correct basis.  The correct basis for the GROSS number of shares - before shares are "withheld" or "sold" for taxes or for exercise - is the sum of what you paid for them plus the compensation income created by the vesting/exercise/sale - depending on your plan.  If your 1099-B doesn't report the GROSS number of shares being sold then translate the basis into a per-share basis figure and use that to calculate the basis to report with your trade.

It's highly likely that the 1099-B DOESN'T report the "correct" basis so you probably will have to correct it.  That's because the brokers do not have to report the "compensation" element of your basis.

Using the spreadsheet-like "fill in the boxes" default TurboTax 1099-B entry form, enter the 1099-B exactly as it reads.  Tick the box next to "This sale involves an employee stock plan (including ESPP) or an uncommon situation."  Click the blue "Start Now" button that shows up and then click the radio button next to "My 1099-B has info I know isn't right, or it has extra info I need to add."  That will allow you to add the missing amount of basis and TurboTax will show all this correctly on Form 8949.

Tom Young

NOTE: TURBOTAX CHANGES THE SECURITY SALES INTERVIEW JUST ABOUT EVERY SINGLE YEAR.  WHILE THE TAX CONCEPTS THEMSELVES IN THIS AREA GENERALLY DON'T CHANGE, THE INSTRUCTIONS ON "HOW TO FIX" THE BASIS REFLECT THE STATE OF THE INTERVIEW FOR TAX YEAR 2015.

[rchilario]

This is INCREDIBLY helpful! I haven't received the 1099B just yet (I read the broker has until Feb 19th). However, I will follow these instructions exactly as directed. Thank you so much!

[TomYoung]

I forgot to mention that if this was a "same day" sale then you might NOT get a 1099-B - it's not required - but the broker still has to prepare a "statement" with all the same information.

If you don't get a 1099-B you don't HAVE TO report the sale, but you may want to anyway, as most "same day" sales create a small loss due to selling commissions and fees.

[rchilario]

I think I fall under this scenario. But is this not a case of double taxation? Taxes were taken out in the original pay out and again when filing income tax. Is that just how it works?

[TomYoung]

No.  You won't "pay again" when you file your income taxes.  

With a regular paycheck you get something of value - US dollars - and taxes are withheld.  You don't know until you complete your income tax return and finally figure out your taxable income if too much was withheld during the year, in which case you get a refund, or not enough was withheld during the year, in which case you owe.  

With these stock awards you get something of value - some stock - and taxes are withheld because the stock creates "compensation," just like a paycheck.  But, again, you don't know until you finally complete your income tax return if too much or too little withholding occurred over the course of the year.  The fact that you received stock instead of cash doesn't change a thing as far as your taxes go.

When you sell the stock - hopefully at a gain - you'll owe taxes on the GAIN, which is the price increase from the time you got the stock.  But that's no different then cashing your paycheck and buying some stock through your broker.  You hope that stock goes up too, and when you sell the stock at a gain you won't think even for a second that somehow you're getting double taxed.

[kaiann]

Tom, first thank you for the information. This has been very helpful.  Two things on our 1099B received; 1. it does not have the date acquired and 2. it does not have the cost basis.  Both say Unknown.  I want to clarify that the date acquired is actually the Granted Date and that the Cost Basis is the payment amount to purchase shares.  The transaction to purchase the shares (in 2015) was the same as the sale (obviously), even though they were Granted in 2012.  Thanks for your input!

[maurafcallahan]

Arg! Again, to do it right one must also follow the COMMENTS?! Really?  Tom Young, if you don't get post the instructions right the first time you need to DELETE it, and repost with the correct the answer. Not everyone has the patience to follow the follow-up drivel...

[TomYoung]

@maurafcallahan

The OP's initial question was, essentially, "do I need to enter the 1099-B too?" and I believe I answered that question succinctly and correctly, ("Yes, and here's why") and even anticipated that the 1099-B might need to be corrected and I provided clear instructions on how to deal with that, too.  

I can't guess what question a poster REALLY meant to ask instead of the one they actually asked.  Nor can I anticipate follow up questions they post that may now occur to them, questions separate and distinct from the original question.  Therefore I don't write a 600-word exegesis trying to explain EVERY POSSIBLE aspect of the subject of their question and every possible "add-on" question that may come up.  And I'm sure that if I did somebody would complain about that.

To keep the "flow" of the Q&A understandable it makes more sense to simply answer add-on questions if and when they occur.

As an unpaid volunteer I strive for excellence, not perfection.

The folks that are actually paid by TurboTax write plenty of FAQ's on many tax topics, and they fall well short of perfection, too.