Cost Basis not reported on 1099-B for short term ESPP

[jeromedawg]

Hi all,

I noticed for a couple of my short term ESPP sales in 2015, that the cost basis wasn't reported on the 1099-B. What I've initially did was went back to the statements showing the original dates and prices of the ESPP purchase (5/2/2014 and 5/2/2015) and used that as the cost basis for reporting in the 1099-B. Is this the correct way to do it? I'm assuming if I don't update the cost basis and leave it blank, I will get double-taxed (also, does this double-taxing issue only apply to short-term sales?).

Am I missing anything?

[jeromedawg]

Ok, now I'm ultra-confused. Using Taxact to do all this and I noticed the following option, which is one of the options that must be specified when filing a 1099-B and that seems to be the option I need to choose:

"B - Short-term transaction in which basis was NOT reported to the IRS"

So am I supposed to leave box 1e *blank* then and then go through "Box 1g Code B - Worksheet for Basis Adjustments" ?

I tried doing that and just got more confused as to the directions there on step 3: "If line 1 is larger than line 2, leave this line blank and go to line 4. If line 2 is larger  than line 1, subtract line 1 from line 2. Enter the result here and in box 1g above 0
as a negative number" - I tried this and it's an auto-populated field that doesn't let me enter anything in... ???

This was all through Quick-Edit... now if I go through the Step-By-Step guidance, and plug in the cost basis, it goes and populates box 1e!!!

I'm pretty stumped with all this stuff... can anyone help? Ugh... I haven't even gotten back around to finishing the 1099-B/8949 form stuff for Wisebanyan either :(

[MDM]

So am I supposed to leave box 1e *blank* then and then go through "Box 1g Code B - Worksheet for Basis Adjustments" ?

In short, yes.
If the basis was not reported to the IRS, you should enter the basis you believe correct in your return.  If an incorrect basis was reported to the IRS, you should report that basis and then your correction along with the reason for the correction.

See http://forum.mrmoneymustache.com/investor-alley/your-2014-1099-b-form-for-an-espp-sale-will-probably-be-wrong/ for similar discussion.

[seattlecyclone]

Do read that other thread. In short, your cost basis will not be the same as the amount you paid if you bought the shares at a discount. Read the rules to avoid being taxed twice on some of this income.

[jeromedawg]

So am I supposed to leave box 1e *blank* then and then go through "Box 1g Code B - Worksheet for Basis Adjustments" ?

In short, yes.

See http://forum.mrmoneymustache.com/investor-alley/your-2014-1099-b-form-for-an-espp-sale-will-probably-be-wrong/ for similar discussion.

Thanks, so I see in one of the posts you wrote this:

"If nothing is reported on the 1099-B for your cost basis, enter the correct number in column 1e of form 8949."

That seems to be the case for me - my 1099-B shows nothing reported for the cost basis. So the question I have is, how do I go about finding the "correct number" to plug-in to column 1e? And also, wouldn't I still need to select "B - Short term transaction in which basis was NOT reported to the IRS" ? The thing is, it seems if I select "B" then I am opting to fill out "Box 1g Code B" and doesn't that assume that Box 1e should have been left blank or "$0" to begin with?



The other thing I wanted to point out is that I reviewed the W2 details I entered and I don't see anywhere indicating that the ESPPs I sold were part of the income reported... - if it were reported would it show up in box 12 as "V - income from exercise of nonstatutory stock incomes" ? So if it's truly the case that this was not reported as income on my W2, does that change any of the above as far as what the 8949 looks like?

[MDM]

Thanks, so I see in one of the posts you wrote this:

"If nothing is reported on the 1099-B for your cost basis, enter the correct number in column 1e of form 8949."

That seems to be the case for me - my 1099-B shows nothing reported for the cost basis. So the question I have is, how do I go about finding the "correct number" to plug-in to column 1e? And also, wouldn't I still need to select "B - Short term transaction in which basis was NOT reported to the IRS" ? The thing is, it seems if I select "B" then I am opting to fill out "Box 1g Code B" and doesn't that assume that Box 1e should have been left blank or "$0" to begin with?

I see now that your 1099-B had no basis reported at all, rather than an incorrect basis.

If the basis was not reported to the IRS, you should enter the basis you believe correct in your return.  If an incorrect basis was reported to the IRS, you should report that basis and then your correction along with the reason for the correction.

The other thing I wanted to point out is that I reviewed the W2 details I entered and I don't see anywhere indicating that the ESPPs I sold were part of the income reported... - if it were reported would it show up in box 12 as "V - income from exercise of nonstatutory stock incomes" ? So if it's truly the case that this was not reported as income on my W2, does that change any of the above as far as what the 8949 looks like?

Those appear to be good questions for your company payroll department. 

[jeromedawg]

Thanks, so I see in one of the posts you wrote this:

"If nothing is reported on the 1099-B for your cost basis, enter the correct number in column 1e of form 8949."

That seems to be the case for me - my 1099-B shows nothing reported for the cost basis. So the question I have is, how do I go about finding the "correct number" to plug-in to column 1e? And also, wouldn't I still need to select "B - Short term transaction in which basis was NOT reported to the IRS" ? The thing is, it seems if I select "B" then I am opting to fill out "Box 1g Code B" and doesn't that assume that Box 1e should have been left blank or "$0" to begin with?

I see now that your 1099-B had no basis reported at all, rather than an incorrect basis.

If the basis was not reported to the IRS, you should enter the basis you believe correct in your return.  If an incorrect basis was reported to the IRS, you should report that basis and then your correction along with the reason for the correction.

The other thing I wanted to point out is that I reviewed the W2 details I entered and I don't see anywhere indicating that the ESPPs I sold were part of the income reported... - if it were reported would it show up in box 12 as "V - income from exercise of nonstatutory stock incomes" ? So if it's truly the case that this was not reported as income on my W2, does that change any of the above as far as what the 8949 looks like?

Those appear to be good questions for your company payroll department.

Thanks, I'm checking with the payroll dept now. I'm assuming as far as getting the correct cost basis, I can just look through my past statements with UBS and find the cost basis there (from the original date of transaction)?

Also, is it necessary/prudent to go through the other ESPP transactions (which are long-term qualifying dispositions) and double-check the cost basis for each of those in the 1099-B against the actual statements/transactions in UBS? Seems like an awful lot of legwork.

EDIT: I just realized that the dates I mentioned for what I *thought* were ESPPs actually appear to be associated with RSUs. Does that change anything? They're telling me supposedly that the ESPPs/RSUs are included in my "Reported W-2 Wages" which doesn't seem right to me and they said there's no breakdown of details between my actual salary/bonuses and ESPPs/RSUs. If this was an RSU sale, since the RSU was 'granted' to me rather than me buying it (at discount or not), does that mean I enter it as B with no cost basis and leave that field blank without adjustments (assuming my Reported W-2 Wages doesn't actually include the RSU sale)?

[MDM]

EDIT: I just realized that the dates I mentioned for what I *thought* were ESPPs actually appear to be associated with RSUs. Does that change anything? They're telling me supposedly that the ESPPs/RSUs are included in my "Reported W-2 Wages" which doesn't seem right to me and they said there's no breakdown of details between my actual salary/bonuses and ESPPs/RSUs. If this was an RSU sale, since the RSU was 'granted' to me rather than me buying it (at discount or not), does that mean I enter it as B with no cost basis and leave that field blank without adjustments (assuming my Reported W-2 Wages doesn't actually include the RSU sale)?

Might be worthwhile for you to take your pay statements starting from January 2015 and put them into Excel for the whole year.  You should have a "YTD W-2 income" in the spreadsheet and that should match each month to the corresponding field on your pay statements.  For that matter, all the YTD amounts (FICA, fed tax, state tax, etc.) should match for each month.   If you find a discrepancy, then at least you will have narrowed down the time at which the discrepancy occurred.

E.g., see the Payroll tab in the spreadsheet attached to this post: http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/msg539186/#msg539186.

In my work at Megacorp, all stock options, grants, etc., did show up in the W-2.  Don't know about your company's procedures.  Doing your own calculations might enable you to have more productive discussions with your payroll folks - good luck!

[jeromedawg]

EDIT: I just realized that the dates I mentioned for what I *thought* were ESPPs actually appear to be associated with RSUs. Does that change anything? They're telling me supposedly that the ESPPs/RSUs are included in my "Reported W-2 Wages" which doesn't seem right to me and they said there's no breakdown of details between my actual salary/bonuses and ESPPs/RSUs. If this was an RSU sale, since the RSU was 'granted' to me rather than me buying it (at discount or not), does that mean I enter it as B with no cost basis and leave that field blank without adjustments (assuming my Reported W-2 Wages doesn't actually include the RSU sale)?

Might be worthwhile for you to take your pay statements starting from January 2015 and put them into Excel for the whole year.  You should have a "YTD W-2 income" in the spreadsheet and that should match each month to the corresponding field on your pay statements.  For that matter, all the YTD amounts (FICA, fed tax, state tax, etc.) should match for each month.   If you find a discrepancy, then at least you will have narrowed down the time at which the discrepancy occurred.

E.g., see the Payroll tab in the spreadsheet attached to this post: http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/msg539186/#msg539186.

In my work at Megacorp, all stock options, grants, etc., did show up in the W-2.  Don't know about your company's procedures.  Doing your own calculations might enable you to have more productive discussions with your payroll folks - good luck!

Thanks! What is the line item description that ESPPs and RSUs should normally show up as on the W2? And where? Box 14? Box 12? Elsewhere?

I'm looking through my actual pay statements and see these two descriptions with the relevant amounts next to each:
"Restrcted Stock"
"Rsudivequivpmt"

Assuming I was taxed on the stock as part of my W2, regardless of if these were RSUs or ESPPs, it sounds like I need to make the necessary adjustments either way so I don't get double-taxed?! Ugh. I hate the IRS

[MDM]

Thanks! What is the line item description that ESPPs and RSUs should normally show up as on the W2? And where? Box 14? Box 12? Elsewhere?

Don't recall exactly - might just be Box 1.  IIRC (and I may not), Code V (as you identified earlier) is for stock options, while the ESPP bargain element (and an RSU?) is just part of normal compensation.

I'm looking through my actual pay statements and see these two descriptions with the relevant amounts next to each:
"Restrcted Stock"
"Rsudivequivpmt"

Assuming I was taxed on the stock as part of my W2, regardless of if these were RSUs or ESPPs, it sounds like I need to make the necessary adjustments either way so I don't get double-taxed?! Ugh. I hate the IRS

Yes!

The Rsudivequivpmt appears to be a "dividend equivalent payment" - in other words, the amount of a dividend you would have received had you actually held stock shares at the time the dividend was paid.  At Megacorp this came through as ordinary income: not added to basis, not given favorable "qualified dividend" tax treatment.

The "Restrcted Stock" amount may be your basis for those shares.

[seattlecyclone]

RSUs are generally a bit simpler to deal with than ESPPs. Unlike with ESPPs, all the ordinary wage-type income is realized on vest date (it's just capital gains after that), and holding period only matters to determine whether the capital gain is short-term or long-term.

Your cost basis should be the value of the stock on vest date, which should match up with the "restricted stock" line on your pay statement. Report this amount on your tax return.