I exercised vested non-qualified stock options from a previous employer in a cashless sale and received the appropriate W2 from that employer with the proceeds taxed as ordinary income. I also got the 1099B from broker but I believe the cost basis is incorrect. My understanding in a situation like this is that cost basis should be FMV less commissions, not the option strike price (which is what broker reported). See TurboTax website link to this topic(Example 2) - https://turbotax.intuit.com/tax-tips/investments-and-taxes/non-quali[product key removed]ns/L8zsxRi7... It appears that TurboTax does not check for this (there is no 8949 form in final package) and I appear to be being double taxed on net proceeds (as ordinary income) and as a short term capital gain on same amount (I can't figure out what TT is doing in background). a) Am I right in my understanding of what cost basis should be and b) How do I adjust this in Turbo Tax (I couldn't find anyplace to adjust the cost basis for what I believe to be a misreported number by broker to IRS (and what will IRS do with conflict?). I am using Premier version. I don't mind paying my fair share but I feel as the results for TT stand now I am being double taxed on this transaction.
You are correct about what the correct cost basis is. Broker/Dealers report cost basis the way they are required to do so, and in cases like this it results in an incorrect cost basis. The way to correct it is to enter an adjustment to cost basis in the 1099-B entry section of the program. If you imported your Form 1099-B, recommend you delete it and enter it manually To do so, while in your return:
- Click on "Search"
- Type "1099-B" in the search window and hit "Enter"
- Delete your existing sale by clicking on the trash can icon
- Click on Add more sales
- Click on "Jump to 1099-b"
- Answer "Yes" to Did you sell any investments in 2018? Click on Continue
- Answer "Yes" to "Did you get a 1099-B or a brokerage statement for these sales?"
- Enter your brokerage
- Answer Yes to " Do these sales include any employee stock?"
- Indicate a few sales (1-3) & click Continue
- On the screen with "We strongly recommend entering your sales from Charles Schwab one at a time" Click on Continue
- Indicate "Nonqualified Stock Options (NQSO)" and continue to enter your transacitons
- At the bottom of the screen, check the box for " The cost basis is incorrect or missing on my 1099-B"
- If you know you cost basis, indicate so and make the adjustment.
- If you don't know, or aren't sure, indicate " I need help figuring out my cost basis" and the program will walk you through making the adjustment.
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