My W2 already reflects my ESPP sale gain. But when I enter my ESPP details, I am double taxed. How can I avoid it?

[Rick19744]

Why do you think you are getting double taxed?
What's in your W-2 is your cost  or part of the cost of the stock not any gain.  This is generally any discount on the cost of the stock and is considered compensation.

[TomYoung · Accepted solution]

I assume that by "enter my ESPP details" you are referring to reporting the sale of the stock.  I also assume that you are reporting a gain on sale of this stock that's the same that as the amount of compensation reported on your W-2, hence your "double taxed" statement.

If all that's correct then the problem is that you are using the wrong basis when you report the sale.  The correct basis to use in this situation is the sum of your discounted "out of pocket" cost PLUS the compensation created by your sale of the stock.  That eliminates the double taxation issue.

Since 2014 brokers are only required to report your out of pocket cost on the 1099-B, not the correct basis that includes the compensation.  So if you simply enter the 1099-B exactly as it reads and don't correct the basis you're reporting the income (compensation and gain) twice.

There's two ways to fix this.  If you have your Form(s) 3921 you can ask TurboTax to "guide me step by step" and enter the sale using the ESPP interview.

The easier way is to enter the 1099-B as it reads but then click on the "I'll enter additional info on my own" blue button.  On the next page enter the correct basis in the "Corrected cost basis" box.

TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.

Tom Young

[VipulDK]

I followed... "The easier way is to enter the 1099-B as it reads but then click on the "I'll enter additional info on my own" blue button.  On the next page enter the correct basis in the "Corrected cost basis" box."

It seems like, after you choose "I found my adjusted cost basis" and enter the amount provided by your broker through supplemental information, it doesn't prompt the question "Is this income reported in W2?".  Maybe it is correcting the way income is reported and avoiding double taxation but Turbo Tax should clarify this otherwise people will keep asking the same question and wonder why they have not been prompted "Is this income reported in W2?".