Tax tips 2010: double check ESPP income

ESPP stands for Employee Stock Purchase Plan. My former employer is a public company, and it offers a good ESPP plan: 15% discount of stock market price at the beginning or the end of plan period (pick the lower of the two prices, then apply 15% discount), the plan period is usually 6 months. I took advantage of that. I was nervous about the market crash in Jan 2010, so I locked in my gains in late 2009. But I found a catch until today when I finalize the federal income tax using Turbo Tax (got 35% off referral from Bank of America here).

Basically I found my W2 form already included the ESPP gain (as my ordinary income). And I already put those in the investment section before today. That’s double counting my income! I am glad I caught this when I double checked my W2 form 😀

Opened traditional IRA
To correct the mistake I made about selling ESPP stocks too earlier, also combined with my new employment situation, I opened an IRA account to reduce the taxable income for year 2009.

Portfolio management lessons: ESPP

Two things I wanted to talk about ESPP: personal bias and taxation.

I remember I grew tired of my undergraduate college at the fourth year, due to various reasons. But after leaving my college for so many years, now I think that’s one of the best places I have been. Personal congnition bias also plays with work. There are always misgivings in the work place, this got intensified with the recession. Recent Economist has an article on this “unhappy work place” topic. But if we take a deeper breath, I think many work places are not as bad as we perceive. In fact, some maybe fabulous business if some reform initiatives being applied.

On the other side of the equation, we all know what happened to Enron and WorldCOM employees and retirees when they put signigicant amount of personal wealth on company stocks. They believed in the pep talk of their CEOs.

Taxation is a complicated matter. Some explaination from Yahoo (Turbo Tax).

Appendix: my ESPP history