My employer underreported ESPP in W2 for 2022. However decided to report it in 2023. How to offset it from being taxed twice?

[bogdanovmk]

Let’s say W2 2022 should have had 5k as ESPP gain but had only 2k. Instead of fixing 2022 my employer added 3k as espp gain in 2023. Sale happened in mid of the 2022 and not last days of year

[KrisD15]

Normally the "spread" (discount) is reported in Box 1 of your W-2 the year the stock is sold and the rest is Capital Gain or Loss.

If your discount was 5,000 and they reported 2,000 for 2022 and 3,000 for 2023, that would still be 5,000 total so I don't see it taxed twice although it still might be incorrect. 

Are you sure the stock was not sold in two separate transactions? What year did you claim the Capital Gain (or loss) ?

Technically, your employer should have issued a 2022 W-2C (Corrected W-2) instead, in which case you would need to amend your 2022 return. Your employer might need to amend their records as well if they didn't claim that as wage expense in 2022. 

It seems that you're saying you earned the 3,000 reported on your 2023 W-2 back in 2022. 

Your employer is reporting it as earned in 2023. 

It's up to you and your employee to decide which year the income was earned, and that would have been the year of the sale. 

Check your Form 3922 to compute the discount. 

If you sold all the stock in 2022, the income reflecting the discount should have been reported on your 2022 W-2 .

For Tax Year 2022, did you report the 3,000 not on your W-2 as Other Income? If that is the case, please continue the question and give us those details. 

[bogdanovmk]

Thank you for your answer.

Let me add details as requested.

Stock disposition happened as 1 single transaction and marked as settled by broker in 2022.

I used forms 3922 as well stock supplemental to calculate all prices and adjust actual price in Schedule D/Form 8949.

Lets say diff between purchase price and FMV  on day of acquisition is 5k.

Because of some mistake employer put into 2022 W2 only 2k. 

However I paid taxes for 2022 on full 5k.

Employer recognized error and decided instead of touching 2022 to report that missing 3k into 2023 W2.

I already got 2023 brokerage tax forms as well as supplemental. None of forms has transaction for that 3k.

Hope that answers my concern about chance to be double taxed

[RobertB4444]

It does!  And you will be if you enter everything as it is.

The easiest fix is to go back and amend your 2022 return and change that five thousand to two thousand which matches the W2 and then you can just put the additional three thousand into 2023 which matches the W2 for that year.  It doesn't match the broker report but if you were ever questioned 'matching my employer's W2' is never a bad answer.

The only other option I see is to leave your 2022 return unchanged and then to adjust your 2023 W2 to match the reality of the situation.  The problem with this approach is that the IRS tends to match the forms that they receive to each other.  So they will be trying to match your W2 and your tax return and they won't match.  So you can expect a letter about it to which you will have to respond with the broker report and the 2022 tax return.

@bogdanovmk