First time filing Form 8949 for ESPP stock sold in 2021 - need help with cost basis adjustment

The note from your brokerage is actually pretty common with ESPP sales. Here's what's happening: when you buy shares at a discount through your ESPP, that discount (the 15% you mentioned) is considered compensation income by the IRS, and it should already be included in your W-2 as ordinary income. When you sell the shares, you need to account for this discount in your cost basis calculation to avoid being taxed twice on the same money. So you'll need to increase your cost basis by the amount of the discount that was already reported as income. For your example, if your reported cost basis is $950, you need to figure out how much of the discount was already included in your W-2. If the fair market value of those 9 shares at purchase was around $1,118 (rough estimate based on your 15% discount), then the difference of $168 ($1,118 - $950) should be added to your cost basis on Form 8949. On Form 8949, you'd report: - The sale as shown on your 1099-B - Use code "B" in column (f) to indicate that you're adjusting the basis - In column (g), enter the adjustment amount (the $168 in this example) - Your adjusted basis would then be $1,118 in column (e) - And your actual gain would be $1,682 ($2,800 - $1,118) in column (h) This ensures you're only paying capital gains tax on the actual appreciation since purchase, not on the discount that's already been taxed as ordinary income.

After struggling with almost the exact same ESPP tax situation last year, I found this tool called taxr.ai (https://taxr.ai) that really helped me figure out the correct cost basis adjustments. It analyzes your stock sale documents and breaks down exactly how to report ESPP sales, including all the adjustment codes and amounts for Form 8949. What I liked about it was that I could just upload my 1099-B and ESPP statements, and it showed me step-by-step what to put in each box on Form 8949, including the exact adjustment amount needed for my cost basis. It even explained why the adjustment was needed - basically to avoid double taxation on the discount portion. For my situation, it also flagged that I had a disqualifying disposition (I sold some shares before meeting the holding period requirements), which needed different treatment than my qualifying dispositions. Not sure if that applies to your situation, but it's something to be aware of with ESPP sales.

Just wanted to follow up about the taxr.ai tool mentioned earlier. I was skeptical, but I decided to try it for my ESPP and RSU sales from last year. I'm really glad I did! The tool found that I needed to make a $1,240 adjustment to my cost basis across multiple stock sales that would have been easy to miss. The step-by-step breakdown of exactly what to enter on Form 8949 was super helpful. It identified which transactions needed code "B" adjustments and exactly how much to add to the cost basis for each sale. It also warned me about a wash sale I had from some other stock trading that I didn't even realize would affect my ESPP reporting. For anyone dealing with employer stock sales (especially first-timers like me), it was definitely worth using. I probably would have either overpaid on taxes or filled out the forms incorrectly without it.

If you're still having trouble after trying to figure out all the ESPP adjustments yourself, you might want to try Claimyr (https://claimyr.com). I was completely lost with a similar ESPP issue last year and spent hours waiting on hold with the IRS trying to get clarification. After giving up on the hold times, I found Claimyr (there's a demo video at https://youtu.be/_kiP6q8DX5c) that actually got me connected to an IRS agent in about 20 minutes instead of the 2+ hours I had been waiting before. The agent walked me through exactly how to report my ESPP sales on Form 8949, including the proper adjustment codes and calculations. It sounds like your situation might benefit from direct IRS guidance, especially if you can't find documentation showing how much of your ESPP discount was included in your W-2. The IRS agent I spoke with was surprisingly helpful and patient with explaining the whole process.

Just wanted to update after my skeptical comment about Claimyr. I decided to try it anyway since I was desperate to get clarification on my own ESPP reporting issues before the filing deadline. I'm honestly shocked - it worked exactly as described. I had been trying for days to get through to the IRS with no luck. The Claimyr service connected me with an agent in about 25 minutes. The agent confirmed that I needed to adjust my cost basis using code "B" on Form 8949 and explained exactly how to calculate the adjustment amount for my ESPP shares. The call saved me from potentially making a big reporting mistake. The agent also sent me to the specific section of Publication 525 that covers ESPP taxation which was super helpful. I probably would have given up and just guessed without this service, so I'm glad I tried it despite my initial skepticism.

One thing I haven't seen mentioned yet is the holding period requirements for ESPP shares. Based on your dates (acquired 6/15/2018, sold 4/12/2021), you've met the long-term holding period requirements, which is good. If you had sold within 1 year of purchase or within 2 years of the offering date (when your ESPP purchase period began), it would be considered a "disqualifying disposition" which has different tax implications. In that case, you might have had to report additional ordinary income. Since you held the shares for nearly 3 years, you've met both holding period requirements, so you should only need to worry about the cost basis adjustment everyone's talking about. Just make sure you classify it correctly as long-term capital gains on your 8949.

I've been doing my taxes for years and ESPP reporting is consistently one of the most confusing things. Here's a simplified way to think about it that helped me: 1. When you buy ESPP shares at a discount, that discount is considered compensation (essentially like a bonus from your employer) 2. Your employer includes this "bonus" in your W-2 income the year you purchase the shares 3. When you later sell those shares, you need to increase your cost basis by that "bonus" amount to avoid being taxed twice 4. On Form 8949, you list what's on your 1099-B, then use code B to adjust the basis My tax software (FreeTaxUSA) actually has a specific section for ESPP sales that walks through this calculation. I switched to it after TurboTax kept calculating my ESPP sales incorrectly.