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Old 06-07-2021, 10:09 PM   #41
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So what is different about ESPP than holding the same stock outside of ESPP?
Already answered upthread.
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Old 06-07-2021, 10:11 PM   #42
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Already answered upthread.
I get 1099-B from Fidelity.
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Old 06-08-2021, 11:26 AM   #43
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I get 1099-B from Fidelity.
That means nothing. You or your CPA need to know whether it's correct. One of my ESPP's was handled by E-trade and their 1099 was missing the basis adjustments that were described in comment 27.
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Old 06-08-2021, 11:28 AM   #44
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That means nothing. You or your CPA need to know whether it's correct. One of my ESPP's was handled by E-trade and their 1099 was missing the basis adjustments that were described in comment 27.
I’ve never used a CPA or a tax professional in my life. Is it worth it?

Cost basis is listed in the form and reports to IRS.
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Old 06-08-2021, 11:51 AM   #45
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I’ve never used a CPA or a tax professional in my life. Is it worth it?

Cost basis is listed in the form and reports to IRS.

ESPP shares have different rules. A google search of ‘espp taxes’:

https://turbotax.intuit.com/tax-tips...lans/L8NgMFpFX

I use TT Premier to deal with ESPP. I did it by hand many years ago and glad I don’t have to anymore.
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Old 06-08-2021, 12:00 PM   #46
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ESPP shares have different rules. A google search of ‘espp taxes’:

https://turbotax.intuit.com/tax-tips...lans/L8NgMFpFX

I use TT Premier to deal with ESPP. I did it by hand many years ago and glad I don’t have to anymore.
Oh ok. How much did you pay for TT Premier?
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Old 06-08-2021, 01:05 PM   #47
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Oh ok. How much did you pay for TT Premier?

https://www.early-retirement.org/for...ts-107069.html
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Old 06-08-2021, 01:18 PM   #48
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Thanks.
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Old 06-08-2021, 01:50 PM   #49
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I’ve never used a CPA or a tax professional in my life. Is it worth it?

Cost basis is listed in the form and reports to IRS.
Is it worth it to do your taxes correctly? Only you can answer this.

The cost basis that Fidelity reports to the IRS is wrong. The IRS knows that this number is wrong and they have provided a way for you to report the correct number on form 8949. You can do that by buying software that handles this situation correctly, by having a professional do your taxes, or by filling out the forms by hand.

However, if your income is below $52.5K (below $105K if you are married), then you don't have to pay cap gains tax on these sales anyway and adjusting the cost basis won't make any difference to your taxes owed. So you'd be spending money on the software or a tax preparer and not saving any money on your taxes.

If you are earning more than the above amounts, then your taxes would be lower if you did them right. It's hard to say if you'd save enough to make it worth paying to do them though.
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Old 06-08-2021, 02:14 PM   #50
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Is it worth it to do your taxes correctly? Only you can answer this.

The cost basis that Fidelity reports to the IRS is wrong. The IRS knows that this number is wrong and they have provided a way for you to report the correct number on form 8949. You can do that by buying software that handles this situation correctly, by having a professional do your taxes, or by filling out the forms by hand.

However, if your income is below $52.5K (below $105K if you are married), then you don't have to pay cap gains tax on these sales anyway and adjusting the cost basis won't make any difference to your taxes owed. So you'd be spending money on the software or a tax preparer and not saving any money on your taxes.

If you are earning more than the above amounts, then your taxes would be lower if you did them right. It's hard to say if you'd save enough to make it worth paying to do them though.
As discussed earlier, if my tax liability is $0 then it won’t matter right? My taxable salary is $60k but AGI gets well below $52.5k because of pre tax benefits, deductions and credits.
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Old 06-08-2021, 06:08 PM   #51
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$14.95 commission was charged for selling the shares. I guess I don’t have any control over that.
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Old 06-08-2021, 08:19 PM   #52
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The cost basis that Fidelity reports to the IRS is wrong. The IRS knows that this number is wrong and they have provided a way for you to report the correct number on form 8949. You can do that by buying software that handles this situation correctly, by having a professional do your taxes, or by filling out the forms by hand.
I used FreeTaxUsa which correctly generates 8949 form. It's $15 to file Fed taxes with it.
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Old 06-08-2021, 08:21 PM   #53
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I used FreeTaxUsa which correctly generates 8949 form. It's $15 to file Fed taxes with it.
It has you fill out 8949?
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Old 06-11-2021, 03:35 PM   #54
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As discussed earlier, if my tax liability is $0 then it won’t matter right? My taxable salary is $60k but AGI gets well below $52.5k because of pre tax benefits, deductions and credits.

Hold on....don't get too excited just yet.


Some Mega Corps require you to hold the ESPP shares for 24 months. If sold before 24 months, then that 15% discount is taxed at ordinary income. Check with your company to see if this pertains to you. This is how the 15% discount is handled at my Mega Corp for ESPP shares.
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Old 06-11-2021, 04:18 PM   #55
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Hold on....don't get too excited just yet.


Some Mega Corps require you to hold the ESPP shares for 24 months. If sold before 24 months, then that 15% discount is taxed at ordinary income. Check with your company to see if this pertains to you. This is how the 15% discount is handled at my Mega Corp for ESPP shares.
My company use to be sell anytime but now it’s 1 year holding period. Fidelity system won’t even allow me to sell shares beyond 1 year.
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Old 06-11-2021, 04:22 PM   #56
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My company use to be sell anytime but now it’s 1 year holding period. Fidelity system won’t even allow me to sell shares beyond 1 year.

Sounds good. I have got stuck paying taxes on the 15% discount because I sold my ESPP shares before the 24 month period that my MC requires.

Wish my company was like yours.
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Old 06-11-2021, 04:25 PM   #57
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Sounds good. I have got stuck paying taxes on the 15% discount because I sold my ESPP shares before the 24 month period that my MC requires.

Wish my company was like yours.
Is it with Fidelity?
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Old 06-11-2021, 05:22 PM   #58
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My wife worked for a Fortune 500 company for 35 years and from day one participated in their ESPP. Most of her shares were acquired in the 80s with the only new shares since then being due to quarterly dividend reinvestments.

We decided to sell all her shares this year and found out that their current ESPP servicer ComputerShare had no basis recorded for the bulk of her purchases. Only the shares bought using dividend reinvestment, about 20% of the shares, had a cost basis recorded in their system.

TBH the stock prices when she purchased most shares was only about 10-20% of the current market price so there was going to be substantial capital gains anyway but now we're going to pay capital gains on almost 100% of the proceeds for the bulk of the shares.

Likely the tax difference will be less than $10k but that's still money we won't have after filing taxes.
One company I worked for is a Fortune 50 company. I held all ESPP shares for more than 10 years. While I participated, company would send me a paper transaction sheet very 3-6 months, listing my ESPP share and RSU share transaction date, cost base, percentage of discount, grant date, etc. I saved all those paper record in a binder.

Before I left that company I asked HR department to send me a spreadsheet of all the ESPP, RSU, stock option shares. The report also listed all the purchase dates, shares, cost base, grant dates, etc.

I tried to match all these records with the brokerage balance, and they do not match up due to stock split and portion of RSU shares already taken out to pay tax automatically. So, it is a mess in terms of tax.

Today, the total value of this holding is a little more than 7 figure and my true cost that I contributed is less than 10% of that.

My plan is to gradually liquidate my position with the paper trail that I can clearly match up. In the end, there will be certain portion that I cannot match anymore, then I will use $0 cost base just pay the tax. If I leave the remaining shares to my heir, they will have a step-up cost base.
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Old 06-11-2021, 05:28 PM   #59
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One company I worked for is a Fortune 50 company. I held all ESPP shares for more than 10 years. While I participated, company would send me a paper transaction sheet very 3-6 months, listing my ESPP share and RSU share transaction date, cost base, percentage of discount, grant date, etc. I saved all those paper record in a binder.

Before I left that company I asked HR department to send me a spreadsheet of all the ESPP, RSU, stock option shares. The report also listed all the purchase dates, shares, cost base, grant dates, etc.

I tried to match all these records with the brokerage balance, and they do not match up due to stock split and portion of RSU shares already taken out to pay tax automatically. So, it is a mess in terms of tax.

Today, the total value of this holding is a little more than 7 figure and my true cost that I contributed is less than 10% of that.

My plan is to gradually liquidate my position with the paper trail that I can clearly match up. In the end, there will be certain portion that I cannot match anymore, then I will use $0 cost base just pay the tax. If I leave the remaining shares to my heir, they will have a step-up cost base.
$100k profit?
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Old 06-11-2021, 05:29 PM   #60
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Don't forget you will also owe ordinary income tax on the discount you received. The holding period for income calculation is 2 years from the offer date, not 1 year from the purchase date as it is for the long-term gains.

Assuming the stock went up between the offering date and the purchase date:
- if you held it for 2 years from the offering date, then you owe income tax on 15% of the price on the offering date. In this case, only the actual discount you received is considered income.
- if you held it for less than 2 years from the offering date, then you owe income tax on the difference between the price on the purchase date and the price you paid. In this case, the discount you received plus all gains during the offer period are treated as income.

This income will be reported on your W2 as wages in box 1, but it may or may not also be shown in box 14 or in an accompanying statement on your W2. You should get some paperwork by mail or e-mail lthat describes the transaction. Make sure to save it just in case your W2 doesn't have enough info to figure it out. You need to know the amount that's being treated as ordinary income because when you do your taxes you will add that amount to the basis shown on your 1099-B so that your long-term gains will be reduced. If you don't make this adjustment, then you'll end up paying both income tax and long term cap gains tax on the same money. Some brokerages will send you an extra statement at tax time that does the calcs for you, but not all of them do that, and you still have to know enough to read that statement and adjust the reported basis correctly on your tax return.

I understand the point of view that you should always sell ESPP shares on the first possible day to lock in the gain, but we always sold two years past the offer date to minimize the taxes. We only had a couple of times through the years where this would have meant taking a loss so we just held onto those shares until they were positive again.
+ 100

I held on to all ESPP shares long term. I sold a small portion a couple of times, and tax calculation is quite challenging. I have a spreadsheet to do that. Each time, I have to review the requirements and the formula to make sure I do it right. Charles Schwab has an article about how the calculation works.
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