1099-B on vested Long Term Incentive Plan (LTIP)

[Mister _TT]

Hi,

In 2021, I received 500 shares of stock as part of LTIP and the broker that holds my shares sold 200 shares to pay for taxes (State, Fed, and Medicare taxes). The broker sent me 1099-B form but list the proceed as Gross Proceeds reported to IRS but didn't list any tax withheld. Turbo Tax does have a form to list this but how do I report on my tax return? Should I list all 500 shares or just the shares the broker sold to cover taxes? And according to my W-2 box 12(a-d), it doesn't list LTIP shares as income reported on my W-2. In effect, I still have 300 shares but I haven't gain any cash value from them yet. Please help if you can.

Thanks,

[GeorgeM777]

We need some additional information regarding your company's LTIP.  For example, are the LTIP shares similar to restricted stock units (RSUs).  If yes, report all 500 shares on your return.  The value you assign to the shares should be as of the day the shares vested with you.  That value will be your cost basis. 

For the sale of the 200 shares, just report the gain or loss from the sale of the 200 shares based on the proceeds received less your cost basis.   Whether that sale is long-term or short-term depends on how long you have held the shares.  One year or less, the sale is a short-term gain/loss.  More than one year, the sale is a long-term gain/loss. 

@mister_TT

[GeorgeM777]

We need some additional information regarding your company's LTIP.  For example, are the LTIP shares similar to restricted stock units (RSUs).  If yes, report all 500 shares on your return.  The value you assign to the shares should be as of the day the shares vested with you.  That value will be your cost basis. 

For the sale of the 200 shares, just report the gain or loss from the sale of the 200 shares based on the proceeds received less your cost basis.   Whether that sale is long-term or short-term depends on how long you have held the shares.  One year or less, the sale is a short-term gain/loss.  More than one year, the sale is a long-term gain/loss. 

@mister_TT

[Mister _TT]

Thanks GeorgeM777.

Yes, it's similar to RSU. I do understand what you're saying about cost basis, thanks for clear that up. The issue I have is the proceed of 200 shares went to me pay taxes which doesn't show in 1099-B from the broker. I try to avoid paying taxes on the same proceed here. 

Appreciate your help.

[GeorgeM777]

Thank you for that clarification.  If the sale of the 200 shares was done to cover your withholding obligations and was sent to the Department of Treasury, then you would not report its sale to determine the gain or loss.  Rather, and assuming the amount is not already on your W-2, you can include the proceeds from that sale as a form of income tax withholding not already reported on your W-2.  To do that, (in TurboTax online)

1. Go to Deductions & Credits
2. Scroll down the page to Estimates and Other Taxes Paid
3. Select Income Taxes Paid
4. Scroll down the page to Withholding not already entered on a W-2 or 1099
5. Enter your information. 

@mister_TT

[Mister _TT]

Thanks GeorgeM777,

What about the remaining 300 shares I have? Do I have to report them as income and pay more taxes on them?

Thanks again,

[GeorgeM777]

If your LTIP is similar to RSUs, then the remaining 300 shares should have already been included in the wage amount on your W-2 in an amount equal to their value on the day the shares vested.  Given that your company sold 200 shares to cover their tax withholding obligations implies that the value of the remaining 300 shares has already been included on your W-2.  If the value of the remaining 300 shares has not been included on your W-2, then yes, report that value on your tax return.  But its worthwhile to confirm with your company before including the value of the 300 shares on your tax return because you don't want to pay tax twice on the same value.

Do you have an amount in Box 14 on your W-2?  Companies will use Box 14 to include the value of, among other things, RSUs vested with employees.   If there is an amount in Box 14, typically the amount in Box 14 has already been included in Box 1 Wages on the W-2.  

@mister_TT

[Mister _TT]

I checked Box14 and it doesn't include the vested shares. So if I report the 300 shares as income, I have to pay taxes on them, correct?

Thanks for your help.

[DianeW777]

Yes, but you should assume they are already included in your W-2 box 1 wages if they vested in 2021.  Likewise the taxes paid from the shares sold should be included in all the withholding figures on your W-2.  It's important to check with your payroll department to see exactly what is reported on your W-2 so that you do not duplicate any entries on your tax return. 

It would be very unusual for your company not to include all of this information on your W-2, as required by the IRS.  If the only shares sold were the ones sold by the company to pay your taxes, then this would be the only separate, manual entry you should need.  Your cost basis has been covered earlier in the thread.

Sometimes employers do use box 14, as noted by our awesome Tax Expert @GeorgeM777, however not always.

@Mister _TT