How to report W2 box 12-V income and 1099-B capital gain

[ptkhisti]

I have sold some options and ESOP in 2023 and income is reported in W2 12v and also added into w2 Box 1. Q1 -> How can find the details of 12v breakdown ? Its not adding upto what I think I sold in 2023.

Q2 -> When I enter 1099-B its telling me to pay more tax. I think its double counting capital gain. How should I fix this ?

Note: I have read multiple posts related to this topic and it says correct the cost basis in 1099 and enter the amount stated in 12-V as cost basis. My problem is I have options and stocks under ESOP plan so my 1099-B is showing 5 entries in short term gain section and 6 more in long term gain section.

[Mike9241]

NQSO Box 1 includes the income from the exercise, the difference between the FMV at the time of exercise and what you paid for the stock.

with regard to your W-2, this income is grossed up for social security, medicare and withholding taxes so the increase for box 1 will be more than 12v. box 3 and 5 also include this income up to the max for social security taxes and all of it for medicare taxes. since 12V only includes the income element you must add what you paid, if anything,  for the option/exercise. this total is your basis for determining gain/loss on sale. if you sold at the time of the exercise, in theory should be no gain or loss. however, fluctuations in price when selling and any costs such as brokerage and security sales fees likely result in a small gain or loss per share. .   

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ESOP

the initial cost basis of an employer’s security in the ESOP is determined by the value of the stock when it was deposited into the ESOP trust. 

Here are some key points:

1. Cash Distribution: If an ESOP distribution is received as cash (without being rolled over into an individual retirement account or another qualified plan), it is subject to ordinary income tax rates for the tax year in which it is received.

2. Stock Distribution: When a distribution is received as company shares, which the participant subsequently sells back to the company, the cost basis of those shares becomes taxable as ordinary income.

3. Net Unrealized Appreciation (NUA): If the current fair market value of the stock exceeds its cost basis, this difference is known as NUA. The NUA portion is taxed at the long-term capital gains rate. Importantly, this taxation occurs at the time of distribution, regardless of how long the distributed stock was held in the plan before the distribution.

thus the 1099-B should reflect the proper gain/loss on the sale of these shares,

[ptkhisti]

Thanks. this is very thorough. Now how can i adjust 1099-b so that my taxable income isn’t double counted. I have following figures available , six digit  lump sum amount in 12-v, multiple transactions on 1099-b , two sections (short term and long term gain) on 1099-b. what am i supposed to do now ?

[ThomasM125]

The amount on your W-2 form referenced by code 12-V represents the discount on the shares you acquired though your non-qualified stock options. If you divide that amount by the number of shares you acquired, you will have a discount income per share amount. When you enter your Form 1099-B, multiply the discount income per share amount by the number of shares sold and you will have the cost adjustment you need to add to the cost basis reported on your Form 1099-B.

When you enter your Form 1099-B, you will choose the option that says you sold employee stock. When you enter the sale information, indicate that you sold Non-qualified stock options and check the box for line 1(e) that says the cost basis is wrong or missing:

 

If you know the cost basis per the instructions above, you can choose on the next screen an option to enter it, otherwise you can choose the option to let TurboTax help you determine the cost basis and you can work through a couple of worksheet to determine the cost basis adjustment.