I opted for manual filing (not using online tax software) this year as it seems to be incurring errors. Now I have confusion. I had base salary and bonus combined about 202k this year (160k+55k). In addition to that I incurred RSU sale and ESPP about 39k and 14.7k each based on my ~December 2022 paystab breakdown which grand totals to about 270k. I had to look into paystab breakdown because W-2 2022 only reports total of 270k. Now I have investment account which tied to my employer's RSU/ESPP which also generated its own 1099B which breaks down same RSU and ESPP into LT/ST. I am confused about this. Do I report this 1099B to IRS? Because ESPP/RSU is already reported on my W-2 as regular income. Further complication is ST part should be taxed less so by including in the W-2 it is putting everything under LT/ST on regular income/ST tax. Or did W-2 report only ST gain as regular income on my W-2 and I report only L2 gain on gain/loss section of 1040?
As of 2020 in the states, if everything is on your w2 the irs will attempt to tax everything as ordinary income What you’ll have to do is file your 1099B separate from your 1040 but write a letter to the IRS explaining what you did. Investment account activity should always be filed separately from employed income Because RSU’s are taxed date of transactions and ESPP are circumstantial, the IRS will attempt to use this complexity normally not fit for 1040’s to incorrectly tax you and credit you later. Which is the reason to separate
You need to enter both W2 and 1099-B into your calculations as both have been reported to the IRS. W2 is for your wages, 1099-B includes, interest income, dividend income and stock transactions to determine both short term and long term gains and losses. Do not mix the two forms. Would have been far simpler to use Turbo Tax and you can enter most of it, the 1099-B by downloading it directly into Turbo Tax to figure out. W-2 you just would have entered it manually into Turbo Tax.
The transactions in question--the sale of RSU and ESPP--are indeed reported on both Form W-2 and Form 1099-B. This is because in some cases a portion of the proceeds from the sale may be subject to social security and medicare tax withholding, because it is a form of compensation. I cannot address the details of your transactions without actually seeing the relevant forms. But the short answer is that if some of the income from the sales is included in your salary or wages on Form W-2, and that income is also included in the net gain that is reported on Form 1099-B, then you have to make an adjustment to the basis that is reported on Form 1099-B. The adjustment is entered in column (g) of Form 8949, and this amount is used when calculating the taxable gain or loss that appears in column (f). The instructions for Form 8949 include some discussion of adjustments to basis, and a chart with a list of codes that identify the reason for the adjustment. I am a tax professional, and I hold a license issued by the IRS. My license allows me to give you this advice: If you are actually filling out the forms by hand, with a pen and a calculator, and planning to file your tax return by mail, you are completely f**king crazy. You probably don't need a tax professional, but you should definitely use tax software and file your return electronically. The likelihood of an error, by you or by the IRS, goes up exponentially when you prepare a return by hand and file it by mail. When you file your return by mail, an IRS employee has to enter all the data from your paper return into the IRS computer system. And that opens the door to a lot of potential errors. They hire seasonal people and they are not well trained. Don't do it. You may send me a DM if you wish.
looks like i will have to go through turbotax. Through ttax,i was seeing tax liability of 12,000$, whereas manually i was seeing refund of 4,000$. But looks like mine is mistaken. I havent gotten to the bottom of it but it appears w-2 will report the difference between purchase price and market price and report gain. whereas, 1099 will gain from purchase price and sell price. It sucks but loks like i will have to report on both 1099 and w-2.
You can file a paper return you just really gotta know how read and write. I do it for certain clients every year, but main thing is to keep track of your executions and have it categorized automatically. I use excel and google sheet feeders to do this, I find that to be most efficient
Sometimes the software is wrong. It's rare, but it can happen. What is more common is that certain forms and algorithms may not be available until March, because the IRS has not released enough information to the software developers. With Congress tweaking things right up until the last minute, sometimes passing new laws in December, the IRS just can't keep up. For example, if you tried to do your tax return in the third week of January, when the IRS begins to accept electronic transmissions, but you want to claim a credit for an electric car, it's not going to happen, because the IRS hadn't even released the form yet. When they finally publish the form, then the coders need time to add it to the software. It is possible that TurboTax is incorrectly handling your situation. Not likely, but possible. But I don't think there are any forms or code missing. Lots of people have employee stock and option transactions, and the rules have not changed dramatically from last year. If you really think TurboTax is giving an inaccurate result, then you should either reach out to their support team, or consult a tax professional. If the program is really producing an incorrect result, you may be able to override certain values by manually typing certain fields. But you should not do that unless you are 110% certain that the program is wrong.