ESPP not reported on Box 1, but on Box 3 of W2.

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rnhung
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Joined: Sun Oct 30, 2016 12:19 am

ESPP not reported on Box 1, but on Box 3 of W2.

Post by rnhung » Sat Mar 10, 2018 6:44 pm

Hi,

I have an ESPP that was sold this year as a disqualifying disposition, and I wanted to make sure I'm not double taxed.

ESPP Purchase price: $5079.90
Value on purchase date: $6215.20
ESPP Value Gains: 1135.40

Sold at $6248.87

I probably don't have the correct terminology above, so please excuse me. My broker is reporting a cost basis of $5079.90 and a sale at $6248.87. The weird thing is that the initial ESPP gains are reported on my W2 under Box 3 (Social Security Wages) and 5 (Medicare Wages) , but not on box 1.

Do I need to make an adjustment via form 8949 to adjust the cost basis of $5079.90.

Thank you very much.

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The529guy
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Re: ESPP not reported on Box 1, but on Box 3 of W2.

Post by The529guy » Sat Mar 10, 2018 7:03 pm

My understanding is that the $1,135.30 is ordinary income. ($6,215.20 - $5,079.90)

The adjusted cost basis would be $6,215.20, producing a capital gain of $33.67. ($6,248.87 - $6,215.20)
The weird thing is that the initial ESPP gains are reported on my W2 under Box 3 (Social Security Wages) and 5 (Medicare Wages) , but not on box 1.
When you write "initial ESPP gains," do you mean the ordinary income part?

(Check out Tax Reporting for Disqualifying Dispositions of ESPP Shares at fairmark.com.)

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tfb
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Re: ESPP not reported on Box 1, but on Box 3 of W2.

Post by tfb » Sat Mar 10, 2018 8:07 pm

rnhung wrote:
Sat Mar 10, 2018 6:44 pm
The weird thing is that the initial ESPP gains are reported on my W2 under Box 3 (Social Security Wages) and 5 (Medicare Wages) , but not on box 1.

Do I need to make an adjustment via form 8949 to adjust the cost basis of $5079.90.
Sounds like it should be the other way around: included in box 1 but not in boxes 3 and 5. You do need to adjust the basis on 8949 to reduce the gain by the amount included on your W-2.
Harry Sit, taking a break from the forums.

rnhung
Posts: 4
Joined: Sun Oct 30, 2016 12:19 am

Re: ESPP not reported on Box 1, but on Box 3 of W2.

Post by rnhung » Sat Mar 10, 2018 8:51 pm

The529guy wrote:
Sat Mar 10, 2018 7:03 pm
My understanding is that the $1,135.30 is ordinary income. ($6,215.20 - $5,079.90)

The adjusted cost basis would be $6,215.20, producing a capital gain of $33.67. ($6,248.87 - $6,215.20)
The weird thing is that the initial ESPP gains are reported on my W2 under Box 3 (Social Security Wages) and 5 (Medicare Wages) , but not on box 1.
When you write "initial ESPP gains," do you mean the ordinary income part?

(Check out Tax Reporting for Disqualifying Dispositions of ESPP Shares at fairmark.com.)
Yup, initial ESPP gains is the ordinary income part.
tfb wrote:
Sat Mar 10, 2018 8:07 pm

Sounds like it should be the other way around: included in box 1 but not in boxes 3 and 5. You do need to adjust the basis on 8949 to reduce the gain by the amount included on your W-2.
That's what I thought... That it should be in box 1. This is my first year with ESPP though so I wanted to check in first. I wonder if I should ask for a corrected w2.

Now because it's not in box 1, it's not taxed as ordinary income. Perhaps k shouldn't adjust the basis.

rnhung
Posts: 4
Joined: Sun Oct 30, 2016 12:19 am

Re: ESPP not reported on Box 1, but on Box 3 of W2.

Post by rnhung » Sun Mar 11, 2018 12:44 pm

Thanks for all the replies so far.

I realize that I read my W2 incorrectly. The ordinary income ESPP gains ARE indeed reported in my Box 1 on my W-2, and not Box 3.
I've adjusted my cost basis and have filed.

Thank you!

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