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52

It's not necessarily free money. If the stock declines by >15% in the six months after you buy it then you've lost money on the deal. However assuming your company is performing at least reasonably compared to other stocks, you are, on average, getting a 15% bonus to your savings. You shouldn't be turning your nose up at that. (if whatever other stocks you ...


23

You're talking about ESPP? For ESPP it makes sense to utilize the most the company allows, i.e.: in your case - 15% of the paycheck (if you can afford deferring that much, I assume you can). When the stocks are purchased, I would sell them immediately, not hold. This way you have ~10% premium as your income (pretty much guaranteed, unless the stock falls ...


18

These are treasury stocks allocated to the plan. If necessary, a company issues new shares (depending on a company it may require shareholders or only board approval).


15

I would not hold any company stock for the company that provides your income. This is a too many eggs in one basket kind of problem. With a discounted stock purchase plan, I would buy the shares at a 10% discount and immediately resell for a profit. If the company prevents you from immediately reselling, I don't know if I would invest. The risk is too ...


14

In the old version of the plan you were flipping the stock very quickly. Some of the money was tied up for almost 90 days, some for only a few weeks. The risk that the stock would fall enough to cause you to lose money was small, but not zero. Therefore you felt comfortable with risking several hundred dollars a paycheck. The general advice is to not make ...


14

This is probably above your pay grade but if your company's stock offers options, there are a number of hedging strategies that would protect you. The simplest one would be to buy 6 month puts whose break even was less than 15% out-of-the-money. You'd be throwing away that premium but it would protect you against all loss of principal. As a random ...


11

Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnings report that could cause the share price to ...


7

It is not a mistake. The stock was sold quickly enough to be considered a disqualifying disposition, so the ESPP discount is considered income. The amount reflected on the W-2 should be the amount saved via the ESPP discount. See the TurboTax article Employee Stock Purchase Plans for more details.


5

Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years. If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% ...


5

The major pros tend to be: The X% discount on whatever you put into the program The major cons tend to be: You typically can't withdraw the money that you've contributed until the stock is bought. In all the ESPPs I've had, the plan will buy stock twice a year. There may be delays between the stock purchase, when you can sell it, and when the money is ...


5

This, unfortunately, is a common problem. For whatever reason many brokerages report the discounted price as your cost basis. If you don't correct this, you will indeed be double taxed. Fortunately almost all tax software includes some mechanism for adjusting your basis. Here is an example with TurboTax. You should receive a Form 3922 with information that ...


4

The difference is ordinary income. If the price drops and you sell for exactly what you paid, you have an income of D and a capital loss of D which usually cancel each other, but not always. For example, if you already have over $3000 in losses, this loss won't help you, it will carry forward. The above changes a bit if you hold the stock for 2 years after ...


4

ESPP is common among US companies, often with a framework similar to your outline. In the US, some ESPPs allow sales of shares to be considered qualifying (subject to capital gains rather than ordinary income tax) if they are sold at least 2 years after the enrollment date and at least 1 year after the purchase date. These details can vary from one plan to ...


4

For tax year 2014, TurboTax Deluxe no longer supports Schedule D.* TurboTax Premier is required if you need to use Schedule D. Alternatively, H&R Block Tax Software Deluxe will handle Schedule D at a fraction of the cost of TurboTax Premier. Update: Beginning with tax year 2015, TurboTax has reversed their disastrous decision and put the functionality ...


4

No, there's no way to avoid this. You sold the stocks, and there's an explicit exclusion in Sec. 1031 for securities, so you cannot defer taxes by exchanging. You will have to recognize the gain and pay the taxes. You cannot roll over non-retirement funds to 401(k), you can only contribute. So that is not an option either.


4

A 15% discount is a 17.6% return. (100/85 = 1.176). For a holding period that's an average 15.5 days, a half month. It would be silly to compound this over a year as the numbers are limited. The safest way to do this is to sell the day you are permitted. In effect, you are betting, 12 times a year, that the stock won't drop 15% in 3 days. You can pull data ...


4

One ESPP I am familiar with also offers a 15% discount on stock and a max of 10% of salary. Deductions are taken from each paycheck and stock purchases are made twice a year. It also has the feature that the 15% discount is applied to the lower of the stock price at the beginning or end of the period. For contributions made at the beginning of a period, ...


3

Assuming US. The only con that I know of is that hassle factor. You have to remember to sell when you get the new shares, and your taxes become a bit more complicated; the discount that you receive is taxed as ordinary income, and then any change in the price of the stock between when you receive it and you sell it will be considered a capital gain or loss. ...


3

Once again I offer some sage advice - "Don't let the tax tail wag the investing dog." Michael offers an excellent method to decide what to do. Note, he doesn't base the decision on the tax implication. If you are truly indifferent to holding the stock, taxwise, you might consider selling just the profitable shares if that's enough cash. Then sell shares at ...


3

This answer fills in some of the details you are unsure about, since I'm further along than you. I bought the ESPP shares in 2012. I didn't sell immediately, but in 2015, so I qualify for the long-term capital gains rate. Here's how it was reported: 2015 W2 from BigCorp The 15% discount was reported on a W2 as BOX 1. WAGES TIPS AND OTHER INCOME: $882 ...


3

Based on the statement in your question you think it should have been on the 2014 W-2 but it was included on the 2015 W-2. If you are correct, then you are asking them to correct two w-2 forms: the 2014 form and the 2015 form. You will also have to file form 1040-x for 2014 to correct last years tax forms. You will have to pay additional tax with that ...


3

I'm assuming you have a qualified employee stock purchase plan (ESPP) and sell immediately after receiving the shares, which means you have what's called a disqualifying disposition. Selling only $1000 worth actually complicates things, so let's instead first assume you sell all shares. What should happen is the W-2 from your employer will report the ...


3

It appears to me that your Cornell citation includes an example that confirms your understanding. Shortly after the paragraph titled "Annual $25,0000 limitation," the following comment describes your hypothetical scenario: Thus, the employee may purchase only the amount of stock that does not exceed the limitation of this paragraph (i) for the year of ...


2

There are two kinds of ESPP plans. In qualified plans, you are not taxed until you sell the stock. In nonqualified plans, you are tasked on the discount at the time you get the shares, and then after that you are taxed as any other stock purchase is taxed. Your basis is the non-discounted price. In my experience, employers do withhold taxes on nonqualified ...


2

If the $882 is reported on W2 as your income then it is added to your taxable income on W2 and is taxed as salary. Your basis then becomes $5882. If it is not reported on your W2 - you need to add it yourself. Its salary income. If its not properly reported on W2 it may have some issues with FICA, so I suggest talking to your salary department to verify it ...


2

You have to calculate the total value of all shares and then ask yourself "Would I invest that amount of money in this stock?" If the answer is yes, then only sell what you need to sell. Take the $3k loss against your income, if you have no other gains. If you would not invest that amount of cash in that stock, then sell it all right now and carry ...


2

One major benefit to being able to buy discounted company stock is that you can sell in-the-money covered calls and potentially make more than you would selling at strike.


2

I have found that using the online version can help determine the correct product. Try Deluxe online, you can upload the data from last year. When you get to the key forms see what happens if you don't switch. Then switch to Premiere. Compare the results.


2

Here are the lists for the tax forms that Deluxe and Premier include. I think you'll be fine with Deluxe because it sounds like all you need is the Schedule D/8949 forms. Deluxe actually includes most investment related forms.


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