Can I use #14 wire pigtails on a 20A circuits?
You can drop to #14 gauge but you must change your breaker to a 15 amp breaker. Can you replace the shallow box with a deeper one and stay with the #12?. You really don't want to lower the circuit rating in a basement. Still pigtail the connection but use the #12. It might make fitting everything back into the box easier. You could also use a box extender to get a bit more room. Some food for thought: outlets in an unfinished basement need to be GFCI protected.