Did we pay double tax on ESPP at Microsoft?

Twitter tweepTwiip
Aug 9 20 Comments

Microsoft folks,
I used to work at Microsoft from 2015-2018. I want to know if Microsoft used to tax the discount portion of ESPP? Sadly i didnt save all my payslips and this year i am going to sell most of my qualifying dispositions. Fidelity is going to tax the discount portion of ESPP.

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TOP 20 Comments
  • Trimble SchrteFarm
    The money that's contributed towards espp is after tax. You just need to pay tax on the profit that you make at the time of selling. The discount is technically part of the profit now if you think about it
    Aug 9 2
  • Twitter tweepTwiip
    OP
    Discount is always counted as income and not long term capital gains no matter how long u hold them. Thats why discount needs to be taxed separately.
    Aug 9 4
    • Trimble SchrteFarm
      Let's say you contribute $4500 and the purchase rate is $50/share and they give you a 10% discount. Then you buy each share at $45. Which means you end up with 100 shares.

      You already paid tax on the $4500.

      Now let's say you want to sell your 100 shares at $55 each. Then you end up with a profit of $1000. You need to pay the tax on this $1000 (short term tax or long term tax depending on when you sell it)

      What are you going on about discount being taxed separately or being double taxed?
      Aug 9
    • Twitter tweepTwiip
      OP
      I am appalled how mis-informed people are here.
      That 1000$ profit from ur example has two portions: 500$ discount and 500$ profit.
      500$ discount is always ur income and taxed as per ur tax bracket.
      Aug 9
    • Trimble SchrteFarm
      Stay appalled
      Aug 9
    • Twitter tweepTwiip
      OP
      👏🏻
      Aug 9
  • Apple FPPM52
    If you hold your shares for more than a year after the purchase date AND more than two years after the beginning of the offering period then any profit above the gain from the discount will be taxed at capital gains tax rates.
    Aug 9 2
    • Apple FPPM52
      For example if you purchase shares at a 15% discount to $10.00 per share ($8.50 per share) and you hold the stock for two years from the beginning of the offering period and sell at $12.00 per share then you would recognize ordinary income at the time of sale of $1.50 per share (the discount) and a long term capital gain of $2.00 per share ($12.00 – $10.00).
      Aug 9
    • Twitter tweepTwiip
      OP
      Correct.
      Aug 9
  • Twitter tweepTwiip
    OP
    So it should be in my W-2 or December 31 payslip?
    Aug 9 2
    • Microsoft MSFTBRO
      Lol I dont recall, I remember it being same as the dividend slip... like a separate slip.
      Aug 9
    • Apple FPPM52
      Form 3922
      Aug 9
  • Intel qazwas
    Intel withholds. My understand is most companies do, but I don't know about MSFT specifically.
    Aug 9 0
  • Facebook bulla1
    If you use Etrade. They will put the BASE PRICE as 0. You must correct them while filing your taxes. Not sure if you were looking for this
    Aug 9 0
  • Qualcomm NqAf57
    I'll be very surprised if Microsoft didn't already tax you on the discount. Qualcomm certainly does (it's added as W2 income) in the year that the shares are bought. I'd check with Microsoft payroll to confirm. There will surely be an email address that you can email.
    Aug 9 0
  • Microsoft MSFTBRO
    Yea I’m pretty sure they send you a tax slip at the end of the year for the 10% espp discount even if you didnt sell.

    I never sold before so I don’t know whether Fidelity tries to double tax. As far as I know you only pay 15% and the gains are laid out on the website when you try to sell.
    Aug 9 0
  • Twitter tweepTwiip
    OP
    Now, when do u pay tax on discount of 500$ is key.
    Some companies add that 500$ in you payslip and you are taxed on that.
    When you go and sell it, fidelity also taxes that 500$ discount.

    What i am asking is if Microsoft does that or not? If yes, i would need to adjust my cost basis in the income tax return next year.
    Aug 9 0
  • Microsoft MSFTBRO
    It should already be taxed at year end...
    Aug 9 0

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