Figure out specifically how to report ESPP imputed income

[hickeng]

The sheet calculates the ordinary income impact of ESPP sale as part of the merger (if any).

However what I don't yet know is how to report that income if it doesn't show up in a W2 automatically.

[anchal-agrawal]

@hickeng given the findings in #43, does this specific issue apply only to (post acquisition) sales of AVGO shares that were converted from VMW ESPP lots, and not to VMW ESPP shares that were surrendered as part of the acquisition? That is, how to report the Pending Ordinary Income (column AZ in the ESPP tab of the sheet) if/when the converted AVGO shares are sold.

[hickeng]

Highly likely, yes, this only applies to post-merger sales.

The only likely scenario where that's not true is if your fractional share came from an ESPP lot. That counts as a sale. The sheet handles this correctly (to the best of my understanding anyway).

[hickeng]

Found by Alex Romanenko:
https://ttlc.intuit.com/community/taxes/discussion/re-how-do-i-add-espp-ordinary-income-that-was-not-included-in-my-w-2/01/1338967/highlight/true#M484377

[cosmotron]

In a draft of my 1040 as prepared by my CPA, they handled reporting the missing imputed income via a Schedule 1, box 8z, "Other income" (which boils up to 1040, box 8). They included a statement which read, "VMWARE EMPLOYEE STOCK PURCHASE PLAN DISCOUNT".

For clarity: I held ESPP lots through the merger, sold them post-merger in 2023, and my W-2 did not include any ESPP income in Box 14.

[chienchia]

You can simply edit the raw forms in TurboTax and it will do it right. Here's how I did it for all my ESPP sells (including the fraction share this time). Below I'll use the fraction share as an example, assuming ESPP was the lot it used for the fraction share reporting.

NOTE: This only works for the desktop version of TurboTax. I don't know how to do this for the online version.
DISCLAIMER: I'm not a CPA nor did I run this by any CPA. So when in doubt, please consult your CPA.

• Do this at the last step of the filing.
• Once done, ctrl + 2 to toggle to the form view.
• Using the left nav to look for Form 1099-B Wks.
• Under Form 1099-B wks, find a long list of Capital g/l adj (XXXsh YYY) forms.
• Click on the one related to the fraction share sell Capital g/l adj (0.FFFFsh BROADCOM INC) form.
• Go to Part III Specific Adjustments and then check Check this box for employee stock sales requiring adjustments.
• Click QuickZoom next to it to open a new employee stock transaction wks.
• In Part III Employee Stock Purchase Plans (ESPPs) line 11. Usually, I'll check 11 (a) and enter the ESPP info below so TurboTax will do the math for me. But this time your amazing gsheet has done the magic, so we can simply check 11 (b) Compensation income, capital gain (loss) amounts already determined.
• Click QuickZoom next to it to go to Part VII.
• Enter the amount from Column AN7 from the ESPP table in the gsheet (the Income & short term gain column for the fraction ESPP share) to Part VII line 28 Amount reported as compensation income for 2023.
• And then once again, click QuickZoom next to it to go to the ESP Comp Wks (Summary of Compensation Income From Employee Stock Transactions).
• In this form, go to Part II Additional Compensation Income to be Form 1040 and you'll see an ESPP entry TurboTax has entered for you.
  • Now if the income hasn't been reported in W-2, for the ESPP row in Part II, you should check
    • No for Included in W-2?
    • AND Yes for Earned Income?.
  • If the income has been reported in W-2, well, you shouldn't have needed to do this, but go ahead and check Yes for Included in W-2? so TurboTax will fix the math.
• Once these are all done, use the left nav to go to Form 1040, the income should now be reported in Form 1040 line 1h Other earned income.

In theory, if your TurboTax version supports ESPP, it should have the step-by-step Wizard to help you with all these, and that's how I learned this when I first filed my ESPP. But all tax forms are included in any version of TurboTax, so as long as you know which forms to enter the right number, any version of TurboTax should be able to handle this.

Also in theory, as long as the income is correctly reported to Form 1040, there isn't a clear rule about how to do it. So simply adding it in 1040 line 8 should be fine too.

HTH.

(BTW, thank you for sharing the great sheet that saved me weeks of struggling. Kudos for the work!)