ISO disqualifying disposition to report on Schedule 1 Line 8j

[earlgrey]

I exercised ISOs to purchase shares and sold the shares in the same year (2021). My understanding is that the sale is a disqualifying disposition, and the lesser of the difference between the exercise price and the market price of the shares at the time of exercise or disposition should be reported as ordinary income. However, this compensation is not reported on my 2021 W-2. I plan to report it on Schedule 1 Line 8j “Stock options” per IRS instructions, but I can’t figure out how to do so using TurboTax Premier Online. Any advice would be greatly appreciated!

[DavidD66]

To report the ordinary income from a disqualifying sale of Incentive Stock Option shares, with your return open:

•  Click on Federal
•   Select Income & Expenses
• Scroll to the bottom of the page, and next to "Less Common Income" click on "Show More"
• Select "Other income not already reported on a Form W-2 or Form 1099"
• Answer "Yes" to "Did you receive any other wages"
• On the page with "Any Other Earned Income" answer Yes to "Did you earn other wages?"
• Indicate "Other"
• Enter a description and amount

[earlgrey]

Thanks, but following these steps would report the income from the disqualifying sale on Schedule 1 Line 8z ("Other income - other income") with a description I enter, while the revised Schedule 1 for the 2021 tax year indicates that the amount goes on Line 8j ("Other income - stock options"). Is there a way to reflect the income on Line 8j using TurboTax?

[GeorgeM777]

There is another option you might try.   That is, including the discount in Box 14 on a W-2. 

Because the discount is a form of wage compensation, you can enter the amount in question by going to the Income & Expense section (TurboTax online), scroll down to Wages and Salaries, click Start, then click Add another W-2.  Proceed to enter your employer information, and then on the next page is where you will enter the amount.  If you scroll down the page to Box 14 and click on the ? next to Box 14, you will notice in the pop-up window that Box 14 is used by employers to report additional income to the IRS including employee stock benefits such as ESPPs.  

Including the discount in the manner described above is a better option as opposed to including such income on Schedule 1, line 8j.  

@earlgrey