We had some interesting house adventures last week. I was about to get on a plane from Phoenix to San Francisco when we found a house that we wanted to make an offer on. Cue frantic mortgage approving and docusigning of a bunch of stuff before the flight, followed by more frantic phone calls (after midnight Pittsburgh time) after I landed, followed by more signing.
The house was popular and had 5 offers on it, so the next day was more phone conversations about various contingencies and whether we should relax some of them. and raising the offer. The house was listed at $415k and we ended up making an offer of $425k on it.
The contingency our agent was advocating changing was a $10k reduction in the appraisal (so it would only need to appraise for $415k). In the end, we decided that probably wasn’t a good thing to do (we didn’t like the house so much that we would pay $425k for a house only worth $415k), but we did allow for the first $1k of repairs from the inspection to be covered by us.
We ended up not getting the house in the end, which was just as well. We heard from our agent that the house had sold for $435k with a waived appraisal contingency, and it had only appraised for $411k. So that’s hilarious, and I feel bad for the people whose agent told them to drop the appraisal.
I’ve also finished up my taxes. It seems they get more complicated every year… my federal and state taxes this year are a 100-page PDF (including all supplemental forms and estimated tax payment forms). The thing that particularly annoyed me this year was a change (apparently mandated by the IRS?) on how brokerages reported the cost basis for ESPP sales.
When you gain stock through an ESPP purchase, you get a discount on the purchase of the stock. When you sell the stock, this discounted amount is reported as income on your W-2, while the remainder of the gains (or loss) are taxed normally as capital gains.
The change this year is that the cost basis on your 1099-B (and reported to the IRS) is the discounted price. Which means that, unless you manually correct your reported cost basis, you’ll be paying tax twice on that discount (once as income, included in your W-2, and once as part of capital gains taxes). There’s a good article about it here.
In any event, I guess I understand my taxes well enough to make a statement like this now:
The cost basis reported on your eTrade 1099-B form (and reported to the IRS) is wrong. You must do a manual adjustment (column g) with reason “B” (column f) on your 8949, or you’ll be double-taxed on the ESPP discount amount (included as ordinary income in your W-2, and also included as capital gains on your 1099-B).
which is both hilarious and rather depressing. Taxes should not be this difficult. :\
(I guess the IRS figured I’d had enough time to master the art of reporting my RSU vestings, so they threw a new thing at me.)
If anyone is using Turbo Tax, you have to correct this manually via the “Add more Details” checkbox under each stock sale. Select “I need to add or fix info about this sale”, choose “The form 1099-B shows an incorrect cost basis”, and enter the adjusted cost basis. Also double check that the 8949 form was generated with correct values in columns f and g (“B” and the adjustment amount) before filing the return.
This post has been too much text. Have a panorama.