How to calculate adjusted basis for non-qualified ESPP with 20% stock match - tax implications?

This can get tricky, but I'll try to break it down simply. For the matched shares (the 20% your husband receives), those are considered compensation income when received, even though they don't show up on the W-2 specifically. The adjusted basis for those matched shares would be the Fair Market Value (FMV) on the date they were granted to him. This FMV becomes both the compensation income amount AND the basis amount for future gain/loss calculations. For the regular ESPP shares he purchased himself, you're correct that there's typically no need to adjust the basis if this is truly a non-qualified plan (rather than a Section 423 qualified plan). Regarding the losses shown on the Supplemental Form - you're right that losses don't trigger taxation, but you should still report them correctly as they can offset capital gains from other investments. The slightly higher basis than purchase price likely reflects some adjustment the company's already made to account for the compensation element. When you eventually sell either type of shares, you'll calculate gain/loss using: Sales Proceeds - Adjusted Basis = Capital Gain/Loss

I went through almost the exact same situation last year. After hours of research and confusion, I finally found a solution using taxr.ai (https://taxr.ai). I uploaded my ESPP statements and stock match documents, and it automatically extracted all the relevant information and calculated the proper adjusted basis for both the purchased shares and the matched shares. The best part was that it explained everything step-by-step, showing that for the matched shares, the acquisition cost is essentially zero since my husband didn't pay for them directly. The adjusted basis was just the Fair Market Value at the time of grant (which is the compensation income). For the purchased shares, it confirmed that no adjustment was needed since they were from a non-qualified plan. It even explained why the company's supplemental form showed a slightly different basis (they had included some administrative costs that weren't explicitly listed as fees).

I just wanted to follow up - I decided to give taxr.ai a try with my messy ESPP and stock match documentation, and I'm actually impressed. It automatically identified that my company had been inconsistently reporting the FMV on grant dates, which explained why my manual calculations never matched what my financial advisor was telling me. For the matched shares specifically, it confirmed what was mentioned above - the adjusted basis is simply the FMV at grant (the compensation income), and there's no additional acquisition cost to factor in. It even generated a detailed report explaining the calculations that I could share with my accountant. The service saved me from making a costly mistake - I had been double-counting some of the compensation income elements in my basis calculations. Now I feel much more confident about my filing.

If you're spending hours trying to figure out ESPP basis calculations, you should know that getting direct help from the IRS can save you a lot of headache. I was completely lost with my stock compensation questions last year, but could never get through to an IRS agent despite calling repeatedly. I finally discovered Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes instead of the hours I'd wasted on hold before. The agent walked me through exactly how to handle my ESPP matched shares and even emailed me the relevant IRS publications. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent explained that for matched shares, the FMV at grant is both reported as compensation and becomes the basis. This was especially helpful because my situation involved a company merger that complicated the basis calculations.

I have to admit I was wrong about Claimyr. After my skeptical comment, I was still struggling with questions about my ESPP basis calculations, especially since I had both matched shares and discounted purchases in the same plan. I decided to try the service, figuring I had nothing to lose. Within 25 minutes, I was connected to an IRS tax law specialist who actually had experience with employer stock plans. She explained exactly how to handle the matched shares (FMV at grant = basis) versus the discounted shares (which needed a different calculation). The agent even helped me understand why my company's reporting seemed inconsistent - apparently there was a special rule that applied to my specific situation because of a corporate reorganization that happened mid-year. This was information I couldn't find anywhere online or even from my tax preparation software. I'm still amazed I got through and got helpful information so quickly after spending weeks trying to figure this out on my own.

I've been an investment advisor for years and see this confusion about ESPPs all the time. Another point to consider that nobody's mentioned yet: if you're dealing with losses on these matched shares, make sure you're considering the wash sale rules if you're regularly acquiring new shares through the same ESPP. I've seen clients accidentally trigger wash sales because they sold shares at a loss while continuing to acquire new shares through their regular ESPP contributions. The IRS can be quite strict about this.

Has anyone used TurboTax to handle their ESPP reporting? I'm trying to figure out if it correctly calculates the adjusted basis for matched shares automatically or if I need to override what's on my 1099-B.