Excercised Incentive Stock Options - 4 sales on 1099B but only 1 Box V number on W-2 for adjusted cost basis

[coniki]

Extremely confused about how to handle the income from exercising my Incentive Stock Options. I finally exercised a few years worth of options, but Turbo Tax imported them and showing 4 sales on the Investment Sales page of questions. 

My 1099B shows 3 sales, with a box 1e "Cost or Other Basis (b)", and Gain/Loss for each.

My W2 also shows this as Box 1 income, and also a Box 12 V amount, which equates to how much my Box 1 value was above the income on my pay statements.

What I can't figure out is how to address the 4 sale in TT vs. the 3 sales on my 1099-B, and where I put the ONE Box V number into Turbo Tax.

How is this supposed to work?? Help! I want to be able to do this myself and not go to a professional on top of paying TurboTax Premier.

Thank you!

[MaryK4]

What is the 4th sale in TurboTax?  Is it the total of the 3 sales or a different number all together?

@coniki

[coniki]

Thank you for answering. The total is the same, it looks like Turbo Tax somehow split one of the 3 lots into 2 transactions, even thought it's not on the 1099-B.

I also validated on my pay statements that I definitely paid taxes on the sale - that Federal Income Tax line on my pay statement very suddenly increased during the pay period I did the sale. So I know I've paid the taxes, it's just how to correctly document this in TurboTax (and the resulting IRS forms) at this point.

Thank you for any advice to help me resolve this!

[DavidD66 · Accepted solution]

I recommend you delete the import and enter your ISO exercise and sale yourself.   It sounds like you did a simultaneous exercise and sell transaction.  If this is the case, it's a relatively simple thing to report.  The first thing you need to realize is that your 1099-B is probably wrong.  They typically report the exercise price as the cost basis; however, the real cost basis is the value of the stock at the time you exercised the options.  This is because the difference in what you paid (the strike price) and the value of the stock at that time is ordinary income, which is included in your box 1 wages on your W-2.  So, you have to make an adjustment to the cost basis to include that bargain element.  If there is a difference between the value at the time of the stock at the time of exercise (your cost basis) and the value at the time of sale (proceeds), you will have short term gain/loss. To enter the transactions manually, while logged in to your return:

• Click on Search
• In the Search Window type Jump to 1099-B
• Click on Jump to 1099-B
• Click + Add an Account (if the account you downloaded is showing, delete it first)
• Answer Yes to "Did or will you receive a 1099-B form or brokerage statement for these sales? "
• Click on "I'll type it in myself"
• Select your Bank or brokerage and click Continue
• On the page with "Tell us about your 1099-B sales for this Charles Schwab account" answer the question about employee stock & the number of sales, etc.
• click the button "I'll type it in myself"

The program will walk you through entering the transactions.

[coniki]

Hi @DavidD66 - Just finally getting back to my taxes after a Covid hiatus. As I went to enter the 1099-B (with recognition that the 1099-B is probably wrong) and it makes sense what you said - the amount reported in Box V is much larger, so if I "include that bargain element" - how would I calculate the new Cost Basis? Would it be the same amount as what is reported as Income in Box V, or the Total Proceeds from the Sale...? (Box V is about $18K higher than what's in the Proceeds...wow, I'm confused)

Also, on the second part - since this was a single cashless transaction - there is no difference between the value at the time of the stock at the time of exercise (your cost basis) and the value at the time of sale (proceeds), because that was all one transaction. Am I interpreting that correctly?

Thank you in advance for clarification!