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I entered the detailed information in the Employee Stock worksheet, clicked the box that it was not on the W-2 and it shows that the income will flow to Line 7. However, ProSeries is also generating a Capital Gain worksheet and asking for info to report a sale of the restricted stock, and I can't figure out how to show the stock as held by the taxpayer, not sold.
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This is one thing I don't understand with PS, that everyone seems to be really hung up on this employee stock worksheet.
Did your client actually follow the Rev. Proc. to file the election both with the IRS and the employer?
If so, the employer has an obligation to withhold on and report the income on the W-2 and that would allow them to take the ยง83(h) deduction.
Your client should work with the employer to get a W-2C issued assuming everything is above board. In case the employer is not cooperative and provided you are satisfied that the election should be valid, you'd then report the income on Line 7 in accordance with the election and attach a F.4852 to the return. Needless to say there's no capital gain.
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The employer's refusal to recognize the election would also have a knock-on effect on dividends; if any is paid, it'd be reported as compensation on his W-2 instead of normal dividend.
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If the employer did not include this, then he really needs to go back to the employer and get it fixed. Either the 83(b) was not properly filed (which likely makes it invalid), the employer did not properly communicate with the payroll provider (need a W-2c), or the employee misunderstood what actually happened. There's no way I would use the PS Wks to add compensation in this circumstance.
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Hi. Thanks for your valuable input. So i add the amount to line 7, generate a dummy W2, and form 4852 just to give the explanation, and file the return? Any FICA tax consequence?
Any leads would be helpful.
thanks,