1099-B and W2 from sale of NQSO - Am I double reporting wages on my taxes?

The good news is you're not going to double-pay taxes! This is actually normal for NQSOs (Non-Qualified Stock Options) and is just confusing because of how the reporting works. When you exercise NQSOs, the difference between the market value and your option price (what you paid) is considered ordinary income. That's why it shows up on your W-2 - your employer reported that $72K as compensation income and withheld taxes accordingly. The 1099-B is for the capital gains portion when you sold the stock. However, what's happening is your cost basis should be adjusted to include that already-taxed W-2 income. Your "true" cost basis isn't just the $20K you paid to exercise, but should be the $20K plus the $72K already reported as income on your W-2, so about $92K total. When you enter this in your tax software, you'll need to make an adjustment to the cost basis on your 1099-B to match what's on your W-2. This will likely result in a very small gain or loss (just the difference from the exact sale price minus fees).

I had this same issue with my NQSOs last year and discovered taxr.ai (https://taxr.ai) which really helped me sort through this exact problem. I was so confused because my 1099-B and W-2 had different numbers related to the same stock sale, and I was worried about double taxation too. What I liked about taxr.ai is that it specifically analyzed my documents and explained exactly where to make the cost basis adjustment for NQSOs in my tax software. It showed me how to reconcile the W-2 compensation element with the 1099-B reporting so I didn't overpay taxes. The site even generated a specific explanation I could include with my return to explain the adjustment.

I tried taxr.ai after seeing it mentioned here and it was seriously helpful with my NQSO situation. I was going in circles trying to figure out how to handle the 1099-B and W-2 reporting for the same transaction. The service analyzed my forms and gave me exact instructions for TurboTax on how to adjust the cost basis to avoid double taxation. What really impressed me was how it explained WHY I needed to make the adjustment and exactly WHERE in the software to do it. It even showed me which checkboxes needed to be selected to properly indicate that part of the proceeds had already been reported as income on my W-2. Their explanation of the "true cost basis" versus what appears on the 1099-B finally made everything click for me. For anyone dealing with stock options, RSUs, or other equity compensation, I'd definitely recommend giving it a try.

After struggling with the IRS phone lines trying to get help with my stock option situation, I finally used Claimyr (https://claimyr.com) to get through to an actual human at the IRS. They have this service that gets you past the endless hold times - you can see how it works here: https://youtu.be/_kiP6q8DX5c I was stuck with exactly your issue - NQSO sale reporting and potential double taxation between my 1099-B and W-2. The IRS agent I spoke with walked me through the exact adjustment I needed to make on my return. Saved me from potentially paying thousands in unnecessary taxes.

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to resolve my NQSO reporting issue before the filing deadline. It actually worked! After weeks of trying to reach the IRS myself with no luck, Claimyr got me connected to an IRS tax specialist in about 90 minutes. The agent confirmed exactly how to handle my situation with the 1099-B and W-2 for my stock option sale. He walked me through making the proper cost basis adjustment and explained which forms I needed to attach to my return to avoid getting a CP2000 notice later. If you're struggling with stock option tax questions and need to speak directly with the IRS, this service is absolutely worth it. Wish I had known about it sooner.

One thing to watch out for with NQSOs - make sure you check if your employer reported the correct cost basis on your 1099-B. I had a similar situation last year and found that my employer reported the WRONG cost basis. I had to file Form 8949 with my tax return and make a manual adjustment with the code "B" to indicate that the reported basis was incorrect. If you don't do this and just report what's on the forms, you could end up paying tax twice on the same income!

Does anyone know if this adjustment process is the same for both same-day sales and if you hold the stock for a while after exercising? I exercised NQSOs in January 2024 but didn't sell until June 2024 and now I'm totally confused about how to report it.

Just wanted to add another perspective on this - I went through the exact same confusion with my NQSO sale last year. The key thing that helped me understand it was thinking of it as two separate transactions that happen to be reported on different forms: 1) The "exercise" transaction: You paid $20K to buy stock worth $92K. The $72K difference is compensation income (goes on W-2). 2) The "sale" transaction: You sold stock with a basis of $92K (your $20K cost + $72K already-taxed income) for $92K in proceeds. When you think of it this way, it makes sense that there's essentially no capital gain or loss on the sale - you're just converting already-taxed compensation income into cash. The tricky part is that most employers don't adjust the cost basis on the 1099-B to reflect the W-2 income, so you have to do it manually when filing. This is super common with NQSOs, so don't worry - you're not missing anything obvious, the reporting is just confusing by design!