Non Qualified Stock option (NQSOP) cashless sell reported on W-2 and 1099-B wash sale

[MEA1214]

I retired out of a company 5 years ago but not exercised my stock options.  In 2025, I sold stock options using a cashless exercise transaction in the same day.  I received a 2025 W-2 from my former company showing box 12a with a Code V and $21,066.84.   My Fidelity 1099-B shows Proceeds $63,190.34, Cost $42,125.26 and $21,065.08 gain but zero for box 1g (Wash Sale Disallowed).  On the Fidelity Supplemental Information Stock Plan Lot Detail, it shows the exact same amount for Proceeds.  However, it also shows Ordinary Income Reported $21,066.84 and Adj Cost Basis $63,192.10, Wash Sale Loss Disallowed $0.64 and Adj Loss of $1.76.  I imported my Fidelity 2025 tax reporting statement and when I was reviewing Investment income section for the NQSOP sale, I noticed that box 1g had the $0.64 that was on the Supplemental Information but is NOT on the 1099-B.  While this doesn't impact my Federal return income taxes due, it negatively impacted my Pennsylvania state tax return by showing the gain of $21.066 and increasing my Pennsylvania taxes owed. 

My questions:

1.  On Turbo Tax, it says "Your information should match your 1099-B exactly." and if I do that, box 1g would have zero.  This would reduce my Pennsylvania Taxes.  Is this correct?  Or, should I leave the $0.64 in box 1g as it was imported from Fidelity?  My concern is that the 1099-B will not match what was reported to the IRS. 

2.  On Turbo Tax second screen it asked for the adjusted stock basis which I entered $63,192.10 which adjusted the amount on form 8949 showing $1 loss.  I believe this is so it is not taxed twice since it is reported on the W-2.  My concern is should it be the same on the Pennsylvania Tax return as the W-2 is showing Pennsylvania State taxes withheld of $1803.10 and I'm concerned that by leaving box 1g with $0.64, I am paying Pennsylvania tax twice on the gain and it not matching the 1099-B reported to the IRS.  Should I delete the $0.64?

[DavidD66]

I always recommend that when reporting employee stock transaction that the information be entered manually, as opposed to importing.   You should enter the information on the 1099-B exactly as it appears on the form, and then adjust the stock price to account for the income reported in box 1 of your W-2.  I don't know why the supplemental information on your 1099-B would have a $.064 Wash Sale listed if it's included on the 1099-B itself.  The amount is so small and it's not on the actual 1099-B, so I would just ignore it (don't report it).  

The information you enter for the transaction should transfer to your PA-40 Schedule D.  It should also have the same gain or loss.  If for some reason it does not show the correct adjusted loss of $1.76 you will need to make an adjustment in the state tax section.   Unlike many states, Pennsylvania individual tax returns do not start with federal adjusted gross income (AGI) or federal taxable income.  Instead, each specific class of income has to be reported directly on Form 40.  The ordinary income ($21,067) from the exercise and sale of the NQSO should also have been reported in box 16 of your W-2.  That would then flow to Form 40 line 1a.  The loss of $1.76 should be on line 5.  

[MEA1214]

Box 1 on W-2 shows $57,423.56.  On Turbo Tax second screen it asked for the adjusted stock basis which I entered $63,192.10 from the Fidelity Supplemental Information.  This adjusted the amount on form 8949 showing $1 loss.   My question, should I use Box 1 from W-2 showing $57, 423.56 or the Fidelity Supplemental Information for the NQSOP sale showing adjusted cost basis of $63,192.10 for the adjusted ?  I'm not clear why Box 1 and adjusted cost basis on Fidelity  Supplemental Information are not the same amount.  

Regarding the $0.64 reported on the Fidelity Supplemental Information but zero on the 1099-B, could that be from the cashless exercise and sell transaction of the NQSOP?

[DavidD66]

The amount in Box 1 of your W-2 is the "bargain element" of your NQSO exercise and purchase, or the difference between the fair market value of the stock and what you paid for it.  That difference is ordinary income.  Your cost basis is the amount you paid for the stock when you exercised the options plus the amount added to your income (that you will have to pay tax on).  Because it was an exercise and sell transaction, you would not have paid out of pocket for the stock, instead that amount would have been withheld from your proceeds. 

The amount in the 1099-B supplemental information should be the amount in box 1 of your W-2 plus the amount you paid for the stock, which is your tax basis.  

A wash sale occurs when you sell something at a loss and also buy the same investment during a 61 day window that spans 30 days before the sale, the day of the sale, and 30 days after the sale.  So it could have something to do with the timing of the exercise and sale of different option grants/lots.  It's $0.64, I wouldn't worry about it.

[MEA1214]

Thank you for the explanation of the difference between W-2 Box 1 and Supplemental Information Adjusted Cost basis.  My question, should I use Box 1 from W-2 showing $57, 423.56 OR the Fidelity Supplemental Information for the NQSOP sale showing adjusted cost basis of $63,192.10 for the adjusted ?

Also, by removing the $0.64 from box 1g in Turbo Tax, the ordinary income of $21,067 from the exercise and sale of the NQSO is being reported in box 16 of my W-2 and is flowing to PA Form 40 line 1a. The loss of $1.76 is on line 5.