This is an extremely helpful response. thank you. Yes, I found myself confused in the tax ramifications of the espp as I do my own taxes on turbotax but this makes things clearer. As Im reading my company's HR guideline for the espp and holding period...it looks as though even after the 2 years holding period (qualified disposition) there is still a small ordinary income portion that is taxed. Currently my espp is through ETRADE. What would happen if I had these shares transferred to my vanguard? Does the reporting stay consistent or would there be avoidance of any unnecessary W2 taxable income when those shares are sold? Thanks again for everyones input.Wash sales. If you sell at a loss within 30 days (before or after) the ESPP purchase date, the loss is disallowed and changes the basis of the purchased stock instead. It's not the end of the world but it's a paperwork headache. (There's a section in the wiki on Wash Sales if it's a new concept.)Does this plan make sense and what am I not seeing or factoring in. Thank you.
If you don't mind holding onto some of your employer's equity, it strikes me as reasonable to sell it at a cadence and quantity that matches the ESPP acquisitions--this is exactly what I did in similar circumstances. At that point you're keeping ~$50k tied up in the employer stock pipeline. (Two years at the max of $25k/year.) Your call if it's a reasonable risk.
That said, there's a lot of wisdom in the standard advice to sell it as soon as it hits your account. (Schwab even has an "auto-sell" button for ESPP shares.) If the stock tanks, your employment might tank too, so why keep those eggs in one basket? If you go this route it's free money at very little risk. (The only risk is that the price absolutely plummets between getting the shares and selling them the next day.)
Last thing: as of a few years ago there was some IRS rule change the resulted in ESPP share sales getting reported with an incorrect basis. Every place I've seen them the ESPP shares are reported as having a basis of the discounted price, except that the discount below FMV is also added to one's W2 as taxable income, so really the basis should be the FMV on purchase date. If you just use the 1099B numbers you'll get double-taxed on the discount. Once you know the concept there are lots of web pages that explain how to correct it; here's one I had bookmarked for being fairly clear and readable that has a complete walkthrough for TurboTax: https://thefinancebuff.com/adjust-cost- ... botax.html If you've been selling ESPP shares and your taxes don't have a form 8949 with a basis correction for that stock, you can probably get some easy money with amended returns.
Statistics: Posted by Investing4MyFamily — Sun Apr 21, 2024 7:11 am — Replies 18 — Views 1327