How to Calculate Taxes for ESPP with No Lookback Provision - Double Check My Math?

You're almost there, but there's a slight misunderstanding in your calculation. With ESPPs that have no lookback provision, the ordinary income portion is actually calculated as the discount on the purchase date, not the offering date. For qualifying dispositions (which you mentioned you're holding until), the ordinary income is the lesser of: 1. The actual discount you received at purchase ($200 × 0.15 = $30) 2. The difference between sale price and purchase price ($250 - $170 = $80) So your ordinary income would be $30, not $27. The remaining gain ($250 - $170 - $30 = $50) would be your long-term capital gain. For Form 8949, your entries would be: (d) Sales Proceeds: $250 (e) Cost Basis: $200 (as reported by broker) (g) Adjustment: -$30 (negative of ordinary income) (h) Gain/Loss: $50 (long-term capital gain portion) That $30 of ordinary income should be included with your other income on your tax return (not reported on your W-2, but added separately).

I've been using https://taxr.ai to handle all my ESPP calculations and stock sales. It saved me so much headache last year! I was in a similar situation with company stock and I kept making mistakes trying to figure out the ordinary income vs capital gains portions manually. The tool analyzes your stock documents and tells you exactly what to report on each form. I uploaded my 1099-B and brokerage statements, and it showed me all the adjustments needed for ESPPs, RSUs, and options. It even handles the wash sale calculations which were driving me crazy. What I really liked is that it explained everything in simple terms while showing me the exact tax form entries. Definitely worth checking out if you're doing this yourself.

Just tried https://taxr.ai for my ESPP sales from last year and wow - it was actually really helpful. I was skeptical at first (as you can see from my question above), but it identified several mistakes I was making with my calculations. I had been calculating my basis incorrectly for years because I was confused about how the discount should be handled when there's no lookback. The tool showed me exactly where to make adjustments on Form 8949 and explained why. It also generated a detailed explanation I could attach to my return. Wish I'd known about this earlier - would have saved me hours of spreadsheet work and probably some money too!

If you're struggling to get through to the IRS for questions about ESPPs or stock plans, I recommend trying https://claimyr.com. I had some specific questions about reporting ESPP sales that weren't covered in any IRS publication I could find, and I spent days trying to get through on the phone. I discovered Claimyr when I was about to give up, and they got me connected to an IRS representative in about 20 minutes instead of the 2+ hour wait I was experiencing before. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent was able to clarify several questions about my ESPP reporting that I couldn't find answers to anywhere else. Totally worth it for the peace of mind.

I need to apologize for my skepticism about Claimyr. After struggling for weeks to get through to the IRS about my ESPP reporting questions, I decided to try it despite my doubts. It actually worked exactly as described. The system called me back when an IRS representative was on the line - saved me about 2 hours of hold time. I was able to confirm directly with the IRS that my approach to calculating the ordinary income portion of my ESPP sales was correct. For anyone else dealing with complex ESPP questions, sometimes getting official clarification directly from the IRS is the only way to be 100% confident in your tax treatment. This service made that possible when I was about ready to give up.

One thing to keep in mind with ESPPs that's often overlooked - if your company doesn't file the correct information with your W-2, you need to make sure you're properly reporting that ordinary income portion yourself. I got audited two years ago because my company didn't include the ESPP discount as compensation on my W-2, and I didn't add it separately to my income. The IRS computer systems matched my stock sale with the 1099-B from my broker and flagged the discrepancy. Make sure you either see that discount amount on your W-2 or add it manually as other income. And definitely keep detailed records of all your calculations!

Another common mistake I see with ESPP calculations is forgetting about commission fees. When calculating your total gain/loss, don't forget to factor in any fees you paid when selling the shares. For example, if you sold at $250 but paid a $5 commission, your actual proceeds would be $245. This affects both your ordinary income calculation (since it's based partly on actual proceeds) and your capital gain calculation.

Great discussion here! I wanted to add a few points that might help others dealing with ESPP calculations: 1. **Record keeping is crucial** - Create a detailed spreadsheet for each purchase lot that includes offering date, purchase date, FMV on both dates, purchase price, sale date, sale price, and all fees. This will save you hours during tax season. 2. **Watch out for same-day sales** - If you sell ESPP shares on the same day you purchase them, the tax treatment can be different. The entire discount may be treated as ordinary income rather than going through the qualifying/disqualifying disposition analysis. 3. **State tax considerations** - Don't forget that your state may have different rules for ESPP taxation. Some states don't recognize the federal preferential treatment for qualifying dispositions. 4. **Multiple brokers** - If your company switched brokers during the year, make sure you're getting all the necessary 1099-B forms. I've seen people miss reporting sales because they forgot about shares held at a previous broker. The original calculation looks mostly correct once you use the purchase date FMV for the discount calculation as Jean Claude pointed out. Just double-check that you're accounting for all fees and that your company isn't already reporting any of this on your W-2.