“Regardless of how the broker reports it, we are going to get it right,” says Bob Meighan, a vice president with TurboTax.īruce Brumberg, founder of, said most people who sold stock acquired through option or purchase plans will have compensation income and need to make an adjustment on Form 8949 (unless the broker has made the adjustment).
#TURBOTAX 2015 HOME AND BUSINESS FOR SALE SOFTWARE#
Intuit, the maker of TurboTax, says employees who use its tax-preparation software will be able to make the correct adjustments through the interview process. For 2015 and thereafter, it will report unadjusted basis for all option shares.įor shares acquired under employee stock purchase plans, however, Schwab will report unadjusted basis for all shares, regardless of when they were acquired. So for 2014, it will report adjusted basis for all shares acquired through options.
As a result, very few customers sold stock in 2014 that was also granted in 2014. It notes that options usually do not vest, or become available for sale, for at least one year after the grant date. Fidelity will include adjusted basis in a supplemental document.Ĭharles Schwab is taking one approach for stock options and another for stock purchase plans. Not all brokers are reporting it the same way.įor consistency, some brokers, including E-Trade and Fidelity, will report the unadjusted basis for all shares sold in 2014 under these plans regardless of when they were acquired. In any case, for stock that was acquired under one of these plans before 2014, brokers have the option of reporting the right basis (adjusted) or the wrong basis (unadjusted). For stock purchase plans, the acquisition date is usually the purchase date, Baksa says. Some brokerage firms are using the date a stock option was granted as the acquisition date some are using the date a stock option was exercised. Note that the new rules apply only to stock acquired in 2014 or later under these plans. The scenarios are too complex to give examples at this point. The remaining $10 will be taxed as a capital gain.įor shares acquired under an employee stock purchase plan, the adjustment depends on how long you hold the stock after purchase. To avoid double taxation on the $20, you must make an adjustment on Form 8949. In this case, $20 will be added to W-, but you won’t get a 1099-B for 2014.įor 2015, you will get a 1099-B showing $10 in cost basis and $40 in sales proceeds. What happens if you exercised the option in 2014, when the market price is $30, but hold onto the stock and sell it for $40 in 2015? To avoid paying tax on that $20 twice, you must make an adjustment on Form 8949. But your basis is really $30,” Baksa says. It will include a cost basis of $10, what you paid for the stock. The broker will issue a 1099 for the sale. “The company will withhold tax and report that $20 on your W-2 as income. When the stock is at $30, you exercise your option and simultaneously sell the stock. (We will assume this is a nonqualified option incentive stock options are a bit different but also fall under the new requirement.) Let’s start with a simple example: Say you were granted an option to acquire stock in your company at $10 per share. The information needed to make the adjustment will probably be in supplemental materials that come with your 1099-B. Warning: Do not use the box labeled “1g Adjustments” on Form 1099-B to make this adjustment that is for something else entirely. To avoid double taxation, the employee must make an adjustment on Form 8949. They can only report the unadjusted basis, or what the employee paid for the stock. 1, 2014, through an employee stock option or purchase plan. Under the new rules, brokers cannot make this adjustment on shares acquired on or after Jan. But the sale also must be reported on Schedule D.Īnd therein lies the rub: Unless you adjust your cost basis, by adding in the compensation component, that amount will be taxed twice - as ordinary income and a capital gain.įrom 2011 through 2013, brokers had the option of making this adjustment for the employee and reporting the correct cost basis on Form 1099-B.
It will be included as wages, in box 1 of your W-2 Form. At least some of your profit is considered compensation and taxed as ordinary income. However, stock acquired under an employee option or purchase plan is different. In a normal stock sale, the difference between your cost basis and proceeds is reported as a capital gain or loss on Schedule D. Proceeds are what you got from the sale, after commissions. Cost basis is what you paid for the stock, including commissions. Brokerage firms use Form 1099-B to report the sale of stock and other securities to customers and the IRS.
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