Saturday, April 1, 2017

ESPP tax return

ESPP is a common income for corporate employees. When report tax, it actually has 2 parts.

1.  1099-B which reports the proceeds and cost basis
2.  Form 3922 which reports the adjustment due to ESPP benefits

FMV per share on grant date
FMV per share on exercise date
Exercise price paid per share

Usually the adjustment is MIN( FMV-grant date,  FMV-exercise date) * 15% = Exercise price paid

The part of amount is already reported in W2 and explained in Form 3922, so we need do adjustment the amount for 1099-B form.

For instance, if 1099-B reports proceeds $1000, and cost basis $800, the taxable amount is $200.
However, if 3922 adjustment is $50, the total taxable income is $200-$50 = $150.

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