How Am I Taxed on Roblox ESPP Sales?
As financial advisors for Roblox employees, we often get the question, “How am I taxed on Roblox ESPP sales?” It’s quite a confusing web, indeed. In this blog we’ll untangle all aspects from the basics of the Roblox Employee Stock Purchase Plan and much more.
But first, you may want to read our blog on Roblox RSUs, and take a minute to follow us on LinkedIn where we post updates on Roblox company benefits.
What is the Roblox ESPP?
The Employee Stock Purchase Plan (ESPP) allows employees to buy Roblox stock (RBLX) at a 15% discount through after-tax payroll deductions. Purchases occur every six months at either the offering date price or purchase date price, whichever is lower (lookback feature).Roblox ESPP Purchase Dates:
- February 25
- August 25
- If these dates happen to fall on a weekend or market holiday, the purchase date then becomes the next trading day.
How are the shares I purchase in an ESPP taxed?
Start by asking “is my sale a Qualifying or Disqualifying Disposition?”Two types of ESPP sales impact your taxes:
- Qualifying Disposition: (held at least 1 year after purchase AND 2 years after the offering date) → Only a portion of the gain is taxed as ordinary income (the lesser of the original discount or the actual gain). The rest is taxed as long-term capital gains (lower tax rate).
- Disqualifying Disposition: (sold before meeting holding requirements listed above) → The 15% discount is taxed as regular income and added to your W-2 in the year you sell. Any extra profit is taxed at a higher rate if sold within a year (short-term capital gains) or a lower rate (long-term capital gains) if held for more than a year.
“But what if I didn’t make a gain on my position?” you may ask. If the stock price drops below your adjusted cost basis at sale, you may have a capital loss, which can offset capital gains or up to $3,000 of ordinary income per year.
What’s Form 1099-B?
Roblox employees who participate in the ESPP and sold shares will receive a 1099-B from Charles Schwab around tax time. It may be a different broker for other companies. You use this 1099-B) to report stock sales to the IRS.It lists:
- Sale price
- Number of shares sold
- Total proceeds from the sale
IMPORTANT for Roblox employees to know:
Brokers often exclude the ESPP discount from the cost basis and report only what you paid out of pocket. This leads to overstated gains if you don’t correct the cost basis using Form 3922 and adjust on Form 8949. If the 1099-B lists “cost basis not reported to IRS,” you must manually enter the correct cost basis on your tax return.
This stuff can get pretty tricky. You may need to consult with a professional tax advisor. We’re providing general guidance here, but remember that it can in no way be interpreted to be a recommendation for what you should do in your specific situation.
Just to summarize our take on things, though…
Is the 1099-B Accurate?
❌ No, the 1099-B often does not report the correct cost basis for ESPP shares.
- The brokerage may only report what you paid out of pocket, excluding the 15% discount (which was already taxed as compensation).
- If you don’t adjust the cost basis, you might overpay taxes by being taxed twice on the discount.
- If the1099-B states ‘cost basis not reported to IRS,’ you must manually enter the correct cost basis using Form 3922.
How does an ESPP sale get reported to the IRS, and what doesn’t get reported?
To sum it up, the sale proceeds are reported to the IRS by your brokerage on Form 1099-B. Your cost basis may NOT be reported to the IRS, meaning you must manually enter the correct cost basis when filing taxes. The 15% discount was already included in your W-2 as income, so you don’t need to report it again. If your cost basis is missing or incorrect on Form 1099-B, you must correct it on Form 8949 when filing taxes.
What’s Form 3922, and how does it come into play?
Form 3922 is provided by Roblox to help you calculate your correct cost basis.It shows:
- Offering date fair market value (FMV)
- Purchase date FMV
- Discounted price you actually paid
What should Roblox employees do with Form 3922? Use the purchase-date FMV [SG1] to calculate your correct cost basis. If Form 1099-B reports a lower cost basis (or none at all), use Form 8949 to enter the correct cost basis so you don’t overpay taxes.
Key Takeaways on the Roblox ESPP
✔ Always verify your 1099-B cost basis against Form 3922 to avoid overpaying taxes on ESPP shares.✔ Understand the difference between qualifying and disqualifying dispositions to plan your tax liability.
✔ If selling early (disqualifying disposition), expect some of your gain to be taxed as ordinary income since the discount was already taxed when you bought the shares.
✔ Use Form 8949 to correct cost basis errors on your tax return, ensuring you only pay tax on your actual gains.
What’s the bottom line about how my Roblox ESPP sales are taxed?
Figuring out how your Roblox ESPP is taxed may feel unsettling, but seeking professional financial advice or using dedicated planning tools may help navigate these uncertainties effectively.Understanding your Roblox employee benefit choices is key. Got a question on your Roblox benefits? Set up a 15 minute chat with Alex: https://calendly.com/alex-sykoncap/talk-to-alex
