Because of an unusual quirk in reporting for a same-day stock sale, the proceeds are reported to you twice—once as taxable wages on Form W-2, Wage and Tax Statement, and again as proceeds from a stock transaction on Form 1099-B, Proceeds from Broker and Barter Exchanges Transactions. Every year, taxpayers get bills for a balance due from the IRS because they did not properly report proceeds and basis from stock options in addition to their income on Form W-2.
The “bargain element,” which is the difference between the exercise price and the stock value, is taxable to you as wages and subject to federal and state withholding. The bargain element is included in box 1 of your Form W-2, and is included in wages on line 1, Form 1040. Since the amount is already included in taxable wages, no additional steps need to be taken to report the bargain element on your tax return.