BUG: ESPP Income - Cost basis computation

[djtthelp]

Does TurboTax really use a cost basis of 0 on Form 8949? That's not what I noticed in my experience, but wow, that's really bad if it does.

Regarding the adjustment amount, I didn't mean you literally get that from your W2. You would have to get this from your brokerage, or maybe you could calculate this based on your company's ESPP plan documents (eg how to handle taxation for qualifying vs disqualifying dispositions) and Form 3922. For example, in my ESPP plan, for disqualifying dispositions (sold < 2 years from subscription date), the ordinary income included in my W2 is the amount of the discount I received on the ESPP shares.

My ESPP plan administrator is E*Trade, and despite having to wait a long time for the 1099's to be downloadable, they provide a Stock Plan Transactions Supplement that includes all the information you need for each sale to enter into TT. In particular, they list the Adjustment Amount (ordinary income reported on your W2), Adjusted Cost Basis, and Adjusted Gain/Loss for each sale. So the (negative) Adjustment Amount given by your brokerage would be what you'd want to enter as the adjustment in that last dialog window. And then you can see if Form 8949 has the correct gain/loss by comparing it to the brokerage Adjusted Gain/Loss.

I've checked the math on this, and I think it works. If others also get adjustment amounts from their brokerages, then maybe they can try this out. But what I was worried about is if the adjustment code is not as expected and whether this raises a red flag at the IRS.

[brian991]

If you go to the forms you can edit the code.  I'm going to wait and hope Intuit fixes this rather than stress about how to rig it and if you all are making sense though! 😀

[Anonymous]

The bug still exists today.  You have to be very careful otherwise you will get taxed twice on the incorrect gains amount.  Even manually putting in the adjusted capital gains amount does not calculate correctly.  Anyone know when this is supposed to be fixed?  

[MVilleGuy9]

Hi - there was a program update today.  Anyone know if this bug was addressed in the update?  I can't find a list of what was fixed in today's update.....thanks

[lipo]

Nope, not fixed.  Just updated a minute ago to the 2/18/2021 update.  ESSP still corrupts the data on the second entry.  I imported my ESSP and RSU data from my broker through TurboTax.  Editing the first entry works fine, editing the second entry intermingles the data from the first entry, beginning at the "Ok, we just need a few more details".  Once you click 'continue' on that screen, the next screen shows data from your first transaction, and there's no recovery.  I'm stuck until a fix is released.  I've used TurboTax for two decades.  In a few days I'm going to try another program.

[djtthelp]

Unfortunately, it's unclear when this will be fixed. So here's another idea for a workaround. Hopefully someone knowledgeable at Intuit can comment on its efficacy. Does anyone who works on TurboTax actually read this forum, or is this just for us victims, um, I mean, users?

For those of us who have the adjusted cost basis for ESPP sales (either from your broker, or from your company, or maybe you know how to calculate this yourself), you can enter this manually into the forms so that the gain calculation is correct -- and you don't get double-taxed. After importing your 1099-B, you can select each ESPP sale and go through the "I have all my info" interview questions as normal, entering all your information. After you're done, of course, TT won't actually use the adjusted cost basis, which is the issue a lot of us are struggling with.

1. Go to View -> Forms, and look for "Capital g/l adj (XXsh XYZ Inc)" that matches your ESPP sale.
2. Click on it to open the Capital Gain (Loss) Adjustments Worksheet.
3. In Part III Specific Adjustments, check the box for "Form 1099-B reports an incorrect basis (code B)...".
4. Enter the adjusted cost basis in the yellow box on that line.
5. Repeat for your other ESPP sales.
6. Click on Form 8949 and check to see if the gains now look as expected.
7. Hit the "Close Form" button at the bottom to get back into Step-by-Step mode.

The total for column (g) (Amount of adjustment) in Form 8949 for your ESPP sales should add up to your ESPP amount in box 14 of your W2 (similar to your cost bases in column (e) for your RSU sales), if your company reports these items.

I'm willing to wait a few more days for a fix, but if we don't hear anything soon, we'll all have to take matters into our own hands and pursue other resolutions. I, for one, feel that manually entering the adjusted cost basis in the underlying worksheets when the normal user interface fails to do this should be a viable workaround, as long as the forms that go to the IRS are correct. But I don't know the inner workings of TT, so I may be missing something.

[Terrapin]

If anybody doesn't want to wait for this to (maybe) get fixed, in another thread regarding the same issue a user suggested a pretty reasonable work-around. Just use a different broker name for each transaction, so that there is only a single ESPP transaction per broker. E.g. you can use Schwab 1, Schwab 2, etc.

[tbellingham]

How can we sign up to receive a notification when this bug has been addressed so we can continue to use the software as intended.

[DanielV01]

@tbellingham  If you'd like, you can provide us with a diagnostic copy of your return.  To do this:

These are the steps to create a diagnostic file:
1. Sign in to your tax return in TurboTax Online.

2. Go back into your return.

3. Find My Tax Tools in the left menu Select Tools.

4. In the Tools Center, select the Share my file with Agent link toward the bottom of the list.

5. You’ll see a message about creating a diagnostic copy of your tax file. Select OK

6. After you click ok you’ll see that A protected copy of your return has been sent along with your 6 digit token number

You would then provide us that token number in this thread, and we would be able to review this more closely.

[edenddc12]

@DanielV01 , when will this bug be fixed? Is the engineering team which managed to somehow break this despite no relevant changes to the tax code even aware of this and how many people are impacted? 

[andrecs]

Hello all. I am the original poster of this subject. I've recently started to work on this again, as it's been awhile and I am honestly worried Intuit is not going to fix this.

I think I have found the problem. Someone else on another thread picked up on this, so I can't take full credit. There is a workaround, but it's LONG. For me, since my wife and I together each have a combined 35+ RSU and ESPP transactions, this will take me hours. But here's the problem.

When you enter the data via the interview process in the "step-by-step", TurboTax creates the proper forms in your tax return. But, what happens is the data doesn't flow from the step-by-step to the "forms" as it should. You can see this by entering forms view (click "forms" in the upper right hand corner). Then look for this:

This is what is created in forms from each RSU and ESPP transaction. It's under the 1099-B (broker name) section in your tax return. 

In my case, I was trying to enter an ESPP transaction. I entered all the correct information in the step-by-step mode (info from my 1099-B and form 3922). However, none of the 3922 information from the step-by-step flowed into the forms (the "Emp Stock Wks"). Since that worksheet is blank, TT computes the cost basis as $0. 

Here is what that looked like for me:

3922 entry screen:

This was actually a 26 share transaction. It mistakenly says it's 9 shares, that's part of the bug where it pulls info from the very first stock sale in your 1099-B (which was a 9 share RSU transaction for me). 

Here is what my forms view looked like after I had completely filled in all the info in the step-by-step:

As you can see, the "Emp Stock Wks" was not filled out with the information from my form 3922 for this transaction. I manually filled in the information in the forms view, and guess what - that fixed it!! (line 14. Also note line 12 was missing, the discount %)

After I did that, I went back to my step-by-step, my tax owed amount had come back up to the expected amount so I wasn't being overtaxed anymore, and I went back into that particular transaction in the step-by-step and it was all showing correct.

So, information will flow from the forms view, to the step-by-step, but not the other way around.

For all of us that have a lot of RSU and ESPP transactions (like me) this workaround will take HOURS of time, because each transaction needs painstaking adjustment in forms view. This is basically like filling out your own tax forms by hand. This is not why we bought TurboTax. However, it will fix it and get your transactions done correctly. 

My hope is this will help people fix their own taxes, and - hopefully give enough information to Intuit to show them what exactly the problem is so they will take it seriously and fix it. 

Good luck everyone.

[andrecs]

@DanielV01 @DianeW777  

I've created a diagnostic copy of my Tax return for you to look at.

There is one ESPP transaction in this copy that is showing this error right now in this copy - a 13 share Microsoft ESPP transaction. Take a look at that one and see what I mean.

Here is the number:

759794

[Terrapin]

Again, a simple workaround is to pretend each ESPP transaction is from a different broker, so you only have one transaction per broker. Use Schwab1, Schwab2, or whatever.

[MVilleGuy9]

There was another program update today.  Was this fixed?  Or can someone post a link to exactly what gets updated by TT each update?  Thanks....

[ReneeM7122]

The following steps should provide a solution to the Employee stock purchase plan cost basis computation:

1. Go to Investment Income > Stocks, Mutual Funds, Bonds, Other > Update > Edit the ESPP stock sale
2. Continue > Edit > (answer the questions about the stock > Choose the Sale Category > Continue
3. Review your information on Less common items > Done
4. For was stock was acquired through employee stock plan?  Choose YES  > No do not remember this answer for all sales > Continue
5. Select Employee stock purchase plan (ESPP) > Continue > Select Company > Enter number of shares sold > Select owner
6. Continue > Select I have all my info > Continue > Enter your information under short or long term as applicable
7. Continue to complete your sale

Please Contact us if this doesn't resolve the issue you're having.

@edenddc12