EPSS Ordinary Income (not on W2) - where to report on Tax return

[fred2017]

Dear Bogleheads:

I have 2 transactions of ESPP in 2022:

1. Date acquired and Date sold both in 2022, employer included ordinary income in W2
2. Date acquired in 2021, sold in 2022, employer did not include ordinary income in W2

Where do I report the ordinary income on the tax return?
- Schedule D is for short-term (and long term) capital gains. If I do not make base cost adjustment (in TurboTax Form 8949), then the short-term capital gains reported will include both this ordinary income and the actual short-term capital gain. Is the correct? (I will report the correct taxable income, but will not differentiate the ordinary income and the short-term capital gain)

- Or somewhere on Form 1040 to report ?

Thank you so much !

[TheBezzle]

I think you mean ESPP?

In 2022 I had Employee Stock Purchase plan (ESPP) ordinary income that was not reported on a W-2, and I reported it on 1040-SR line 1h Other earned income, and that is where TurboTax guided me to do it. And for sure the the cost basis on Form 8949 reflects that, although in this case cost basis was not reported by the broker either. If I look at the version of the return I saved with "all calculation", there are several worksheets that roll the ordinary income number I supplied to TurboTax up into that line 1h.

[fred2017]

I think you mean ESPP?

In 2022 I had Employee Stock Purchase plan (ESPP) ordinary income that was not reported on a W-2, and I reported it on 1040-SR line 1h Other earned income, and that is where TurboTax guided me to do it. And for sure the the cost basis on Form 8949 reflects that, although in this case cost basis was not reported by the broker either. If I look at the version of the return I saved with "all calculation", there are several worksheets that roll the ordinary income number I supplied to TurboTax up into that line 1h.

Yes, ESPP, sorry for the typo.

How did you do that in Turbotax?
1099-R is under Section of Investments and Savings:
- Box 1d - Proceeds
- Box 1e Cost or other basis (if I use the cost basis on my 1099-R, the gain will include both ordinary income and short-term gain)
Here I have the option to check "The cost basis is incorrect or missing on my 1099-B" and then I can enter the correct adjusted cost basis, and the gain will be short-term capital gain.
Then my question is where to report the ordinary income?

There is a section "Other Common Income", but it requires 1099-G, MISC, etc.

Please advise ! Thank you so much !

[GeMoney]

TurboTax has a detailed article on the topic https://turbotax.intuit.com/tax-tips/in ... /L8NgMFpFX

[fred2017]

TurboTax has a detailed article on the topic https://turbotax.intuit.com/tax-tips/in ... /L8NgMFpFX

Thank you very much, I understand very well.

The thing is that my employer did not report the ordinary income in my W2, so I now need to report this ordinary income in my tax return and I could not find a place in Turbotax to report this ordinary income.

Thanks and please help to advise !

[fred2017]

Find solution - the same topic in below link:

https://ttlc.intuit.com/community/taxes ... 00/1331925

There are 2 ways:

1. When entering for 1099B for this ESPP, let TurboTax to figure our the cost basis for you
2. Or use Miscellaneous income, under Less Common Income

Thanks again !

[ssel]

2. Or use Miscellaneous income, under Less Common Income

Some links provided above have outdated information about where to report the ordinary income. (This is due to Schedule 1 being revised in 2021.) For the current rules see Pub 525, or:
https://www.irs.gov/faqs/capital-gains- ... collapse-3

I purchased stock from my employer under a § 423 employee stock purchase plan and received a Form 1099-B for selling it. How do I report this?

Answer:
...
if the Form W-2 doesn't include the income in box 1, report the income on line 8k of Schedule 1 (Form 1040)

Sorry, I'm not sure exactly how to coax TurboTax to do that. You might play around with the TT worksheet "employer stock compensation income [esp comp wks]" and look in Part II for "sch 1" [edited]. Please report back with the details if you're successful.

[erp]

2. Date acquired in 2021, sold in 2022, employer did not include ordinary income in W2

Since stocks dropped last year, I wonder if these were sold at a loss. If so AND it was a disqualifying disposition, then I think the compensation income is 0.

[BlizzardPearl]

Dear Bogleheads:

I have 2 transactions of ESPP in 2022:

1. Date acquired and Date sold both in 2022, employer included ordinary income in W2
2. Date acquired in 2021, sold in 2022, employer did not include ordinary income in W2

Where do I report the ordinary income on the tax return?
- Schedule D is for short-term (and long term) capital gains. If I do not make base cost adjustment (in TurboTax Form 8949), then the short-term capital gains reported will include both this ordinary income and the actual short-term capital gain. Is the correct? (I will report the correct taxable income, but will not differentiate the ordinary income and the short-term capital gain)

- Or somewhere on Form 1040 to report ?

Thank you so much !

The ordinary income that was not included on the W-2 should be reported on line 8K of Schedule 1. I assume you know that in a disqualifying disposition, the entire bargain element (discount) is reported as ordinary income. You would need to adjust the gain/loss on Form 8949 to reflect the higher cost basis if the 1099-B reported only the purchase price.

Since stocks dropped last year, I wonder if these were sold at a loss. If so AND it was a disqualifying disposition, then I think the compensation income is 0.

I do not think that is true. In a disqualifying disposition for an ESPP, the entire bargain element is reported as ordinary income, even if the stock is sold at a loss. The cost basis of the stock, however, is increased by the ordinary income reported. It’s not necessarily a wash, though, being limited by the $3,000 capital loss limitation.

[fred2017]

The ordinary income that was not included on the W-2 should be reported on line 8K of Schedule 1. I assume you know that in a disqualifying disposition, the entire bargain element (discount) is reported as ordinary income. You would need to adjust the gain/loss on Form 8949 to reflect the higher cost basis if the 1099-B reported only the purchase price.

I have all the information, I just don't know how to report it on Schedule 1 Line 8K in TurboTax. Have played around but unsuccessful.

Please advise if you know how to do it in TurboTax.

Thanks so much !

[fred2017]

Sorry, I'm not sure exactly how to coax TurboTax to do that. You might play around with the TT worksheet "employer stock compensation income [esp comp wks]" and look for: "espp ordinary income not reported in W2". Please report back with the details if you're successful.

Just want to report that I tired many times, but was unable to find how to do it in TurboTax.
I have reached out to my former employer payroll that if they can help to correct my W2 to include the ordinary income

[ssel]

I just tried this in TurboTax (download version) and it seems to be working:

- In Forms mode, click "Open Form" and search for "Employer Stock Compensation Income Wks".
- Go to Part II of that form.
- Look for the box labeled "Sch 1" in the last column of the last row of Part II.
- Right-click and select "Override".
- Enter the total ESPP ordinary income not reported on your W-2.
- Check that the correct amount was transferred to Schedule 1 line 8k and from there to Form 1040 line 8.

TurboTax is not showing an error due to the override, so hopefully this is all that's needed.

[fred2017]

I just tried this in TurboTax (download version) and it seems to be working:

- In Forms mode, click "Open Form" and search for "Employer Stock Compensation Income Wks".
- Go to Part II of that form.
- Look for the box labeled "Sch 1" in the last column of the last row of Part II.
- Right-click and select "Override".
- Enter the total ESPP ordinary income not reported on your W-2.
- Check that the correct amount was transferred to Schedule 1 line 8k and from there to Form 1040 line 8.

TurboTax is not showing an error due to the override, so hopefully this is all that's needed.

Thank you so much - I followed your instruction and got the results.
But can we add explanation such as ESPP Ordinary Income not reported on W2, otherwise, it is very hard for people to figure out this.

Thanks.