How Do I Report Income from Employee Stock Purchase Plans on a W2 Form?

Report the income of Employee Stock Purchase Plan shares as wages on Form W2. Fill in box 1 of a Form W2, Wage and Tax Statement with the total earned amount. An employer may also include the reported compensation from box 1 in box 14. Enter the same information in boxes 16 and 18 if you need to factor in state and local taxes.

Employers are further responsible for distributing Form 3922. Send the form to employees to let them know about their purchase and to make tax-return reporting easier. Do not apply Social Security or Medicare taxes to ESPPs. ESPPs also do not have withholding for income tax. Your employee needs to report and pay ordinary income tax on the income from an ESPP even if you fail to report it. Avoid any complications by staying on top of your business’s requirements.

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