Will Turbotax fix its error in computing the cost basis and compensation component of an ESPP Qualifying disposition?

[veezbo]

When going through the ESPP sales info walkthrough and entering the information on my 3922, Turbotax computes the adjusted cost basis and compensation income incorrectly. Since I have a qualifying disposition (held way longer than 2 years), the difference between the option price and the fair market value on the grand date should be the compensation element, and the cost basis adjusted to reflect that.

[TomYoung]

"...the difference between the option price and the fair market value on the grand date should be the compensation element, and the cost basis adjusted to reflect that."

Not necessarily.  With a qualifying disposition the compensation/basis adjustment is the lesser of:

1. the discount allowed on your purchase, determined as of the "grant date"
2. your profit from the shares (selling price minus what you paid for the stock)

In my experience TurboTax does make these calculations correctly though I'll add that I haven't actually done a test entry into the 2019 program.

[harishc]

Even I ran into this issue. I thought that Turbotax would calculate this correctly, but it didn't yet

[TomYoung]

I'll bet you a buck and give you odds that it did, (unless you're using the online version.  Then all bets are off.)

In the desktop version TT's calculations have been reliable for many years.  Nothing has changed in the tax law and  the desktop version's interview hasn't changed.   Except, around 2014, TurboTax removed the option allow the user to tell the program the actual amount of compensation reported on the W-2, thereby allowing the program to make an appropriate adjustment to the "compensation" figure reported.  This was very useful because many employers don't report compensation associated with Qualified Dispositions of stock acquired via an ESPP.  Now you are only allowed to answer "Yes" or "No" when asked if TT's calculations appear on your W-2.  In the case of a situation where some sales are Disqualifying Dispositions and some are Qualifying Dispositions, (not reported on the W-2), answering either "Yes" or "No" will result in a misstated compensation number on your income tax return.

[andrecs]

This all changed for tax year 2020. The interview has now changed, and TT2020 computes the cost basis for all ESPP sales as $0. This is a program error I hope the developers are fixing!

[DianeW777]

The actions that needs to take place in TurboTax Desktop version are shown below.  The following link is helpful using Situation 1.

• Employee Stock Purchase Plans

The steps to this screen are entered below for your convenience.

1. Open your TurboTax account (Desktop Only)
2. Scroll to Investment Income > Stocks, Mutual Funds, Bonds, Other > Update > Edit beside the ESPP stock sale
3. Continue > Edit > Enter the requested details for this stock > Choose the Sale Category > Continue
4. Continue or review your information on Less common items > Done
5. Yes stock was acquired through employee stock plan > No do not remember this answer for all sales > Continue
6. Select Employee stock purchase plan (ESPP) > Continue > Select Company > Enter number of shares sold > Select owner
7. Continue > Select I have all my info ..... > Continue > Enter your information under short or long term as applicable
8. Notice the compensation is shown at the bottom > Continue until you come back to the summary screen for this ESPP sale
9. Done > Done > Done > Your Employee Stock Plan Results screen appears with the selection for the W-2
10. Select Yes or No based on your situation
11. See the images below.

This should allow you to complete this transaction and finish your tax return.

[andrecs]

Hello Diane, thank you for your post. However, I can confirm that this bug does still exist in Turbotax, and has NOT been fixed with the latest software release dated Feb. 10th.

Can you confirm for me that this bug has been identified by Intuit and it is being worked on? If not, we have a huge problem on our hands. 

To clarify, as has been posted by myself and several others, turbo tax will compute a cost basis of $0 for all ESPP transactions, even when you follow the instructions as you detailed above. 

Thank you.

[Miked8290]

I'm having a similar problem.  I sold multiple lots of ESPP shares.  Turbotax seems to be calculating everything correctly for the first lot, but data for subsequent lots (number of shares, cost basis, etc.) is incorrect.  This seems to be a tax year 2020 Turbotax issue since I've successfully navigated ESPP sales in the past with Turbotax.