Employer reported ESPP ordinary income on wrong year's W-2

Question

I sold some Employee Stock Purchase Plan shares on 12/31/2014. As far as I understand, the ordinary income portion of the sale should have been reported on my 2014 Form W-2 from my employer but was not. The sale was reported on a 2014 Form 1099-B from the brokerage. I calculated and reported the ordinary income portion of the sale on my 2014 tax return. The shares were acquired in July of 2014, the same tax year in which they were disposed.

On my 2015 Form W-2, the ordinary income from that sale was included in the taxable wages in box 1. I contacted my employer who simply replied that income is taxable in the year it is received, which doesn't seem like it applies to this case since it's imputed income, not wages paid.

Should I keep pressing my employer to issue a corrected W-2? If not, what should I do?

UPDATE (even though I may literally be the only human to ever encounter this situation, notice, and care):

I called the IRS live human support line multiple times, and was finally and definitively told that they're not trained for this kind of question.

I was directed to Publication 525, which I see specifically states:

Your employer or former employer should report the ordinary income to you as wages in box 1 of Form W­2, and you must report this ordinary income amount on Form 1040, line 7. If your employer or former employer doesn't provide you with a Form W­2, or if the Form W­2 doesn't include the ordinary income in box 1, you still must report the ordinary income as wages on Form 1040, line 7, for the year of the sale or other disposition of the stock.

Therefore, it is clear that the income was taxable in 2014.

I may need/be able to file form Form 4852, Substitute for Form W-2 with an amended return for 2015.

UPDATE 2: The IRS accepted my amended 2015 return and issued a refund by paper check, including some interest (which is taxable).

Answer 1

Based on the statement in your question you think it should have been on the 2014 W-2 but it was included on the 2015 W-2.

If you are correct, then you are asking them to correct two w-2 forms: the 2014 form and the 2015 form. You will also have to file form 1040-x for 2014 to correct last years tax forms. You will have to pay additional tax with that filing, and there could be penalties and interest.

But if you directed them on the last day of the year, it is likely that the transaction actually took place the next year. You will have to look at the paperwork for the account to see what is the expected delay. You should also be able to see from the account history when it actually took place, and when the funds were credited to your account.

or you could just pay the tax this year. This might be the best if there is no real difference in the result.

Now if you added the sale to your taxes lat year without a corresponding tax statement from your account, that is a much more complex situation. The IRS could eventually flag the discrepancy, so you may have to adjust last year filing anyway.

Answer 2

You mentioned that the 1099B that reports this sale is for 2014, which means that you got the proceeds in 2014.

What I suspect happened was that the employer reported this on the next available paycheck, thus reporting it in the 2015 period. If this ends up being a significant difference for you, I'd argue the employer needs to correct both W2s, since you've actually received the money in 2014. However, if the difference for you is not substantial I'd leave it as is and remember that the employer will not know of your ESPP sales until at least several days later when the report from the broker arrives. If you sell on 12/31, you make it very difficult for the employer to account correctly since the report from the broker arrives in the next year.