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Check out our podcast and video on the tax forms and reporting rules for stock sales.

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Form 8949 and Sch. D diagrams! How To Report Sales Of Company Stock On Your Tax Return

If you sold in 2016 any shares that you acquired from equity compensation or an ESPP, you will need to report the sale on the federal tax return that you file in 2017. Learn here what you must know to avoid expensive mistakes and unwanted IRS attention. Our annotated diagrams of Form 8949 and Schedule D can help you make sense of the reporting rules.

12 Tax-Return Mistakes To Avoid With Stock Options And ESPPs

UPDATES! The 2018 tax season has the potential to be confusing if you sold stock in 2017. This article explains common errors to avoid when reporting stock sales on your tax return and provides helpful guidance on various other tax topics involving stock options and ESPPs.

VIDEO! Tax-Return Reporting Of Company Stock Sales: How To Avoid Overpaying Taxes

Learn the rules for reporting stock sales on your tax return, along with costly errors to avoid if the shares you sold came from stock options, restricted stock/RSUs, stock appreciation rights, or an employee stock purchase plan. Among other issues, you must understand your "cost basis" to avoid overpaying your taxes. Running time: 8:05.
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VIDEO! Tax-Return Forms And Reporting Rules For Stock Sales

Learn how to prevent costly tax return mistakes with this animated presentation on IRS Form 1099-B, IRS Form 8949, and Schedule D.

ISOs: Tax-Return Tips And Traps This is premium content

Tax reporting with incentive stock options (ISOs) can be tricky. Learn what you need to report on your return at each stage of your ISO's life cycle.

Avoid Overpaying Tax On Stock Sales: Understand Forms 1099-B And 8949 For Tax-Return Reporting This is premium content

UPDATES! The stock-sale information provided by brokers on IRS Form 1099-B has changed. Cost-basis reporting, both for your broker on Form 1099-B and for you on your tax return, is now more complex, confusing, and vulnerable to errors. This article explains the crucial facts you must know to avoid overpaying tax or attracting unwanted IRS attention.

Presentation! Preventing Costly Tax-Return Mistakes This is premium content

myStockOptions.com
This PowerPoint presentation explains the top 10 most frequently occurring errors involving stock compensation on tax returns and answers common questions about related tax topics.

IRS Instructions For Form 6251: Alternative Minimum Tax

The line-by-line instructions explain how the AMT is calculated and what the IRS expects on the form, including the adjustment for ISO exercises.

IRS Guide To Auditing Techniques For Stock-Based Compensation

The IRS tips its hand on what its agents look for in audits related to all types of stock pay to ensure compliance, whether by corporations or executives.

FAQs

What are the top 10 questions I should ask about the reporting of stock sales on my tax return?

This FAQ presents 10 questions you should ask to be sure that you report your stock sales accurately and avoid costly mistakes that attract the attention of the IRS...

What are the biggest mistakes related to stock options I can make on my tax return, and how can I avoid them? This is premium content

It is all too easy to make costly tax-return errors that attract unwanted IRS attention. Learn how to prevent mistakes...

What are some major issues to be aware of when reporting stock sales on my tax return? Why have these issues arisen?

Major changes have occurred in the tax reporting for stock sales during the past few years, making accurate tax-return reporting more complex and difficult...
Show More FAQs (35 more)

W-2 diagram What will my W-2 show after I exercise incentive stock options? This is premium content

For an ISO exercise in which you hold the stock, nothing is...

What should I do if I don't receive a W-2 or if I lose it? This is premium content

If the company has not issued a W-2 by the middle of February, the IRS suggests...

What tax statement will I receive from my broker after a sale of company stock? What key facts should I know about it? This is premium content

Form 1099-B or the equivalent substitute statement is necessary for the accurate completion of your tax return. Five facts you must know about this reporting to avoid tax-return mistakes are...

How have IRS Form 1099-B and cost-basis reporting changed for sales of stock acquired from my stock options, restricted stock, or ESPP? What do I need to do differently because of the changes?

If you sold shares during the calendar year, your brokerage firm will issue IRS Form 1099-B by mid-February of the following year. This is an important document that you must have to complete your tax return for the year of sale...

In the cost basis I use to report sales of company stock on my tax return, what part comprises the W-2 income from stock compensation or an ESPP? This is premium content

When your W-2 income is added to the price you paid for the stock, this is your cost basis on your tax return. The table below presents the compensation portion of your tax basis for all types of stock grants and ESPPs...

What if the wrong cost basis is reported on my 1099-B? How do I report the right cost basis on Form 8949 of my tax return? This is premium content

From our interpretation of the forms and their instructions, myStockOptions.com recommends the following reporting steps to avoid overpaying taxes...

What's new for tax-return season?

Here's a quick take on issues to be aware of when preparing your federal tax return...

Form 8949 and Sch. D diagrams How do I report a sale of shares in an ISO sell-to-cover exercise? Is there ISO-related AMT? This is premium content

To report the sale of shares in a sell-to-cover exercise, you complete Form 8949 along with Schedule D for the year of...

Form 8949 and Sch. D diagrams After I have met the ISO holding periods, how do I report a sale on my tax return? This is premium content

After you have held the stock more than two years from grant and one year from exercise, the spread between the exercise price and the sale price is...

Form 8949 and Sch. D diagrams How am I taxed if I have made a disqualifying disposition (e.g. sale) of ISO shares in a different year than the year I exercised the option? How do I report this? This is premium content

With ISOs, it is always the sale that triggers taxes. The rules are similar to those that apply to sales of ISO shares made in the same year as exercise; the difference is that...

Form 8949 and Sch. D diagrams I did cashless exercises/sales of stock options from several grants simultaneously. Do I need to report each sale separately, or can I attach the 1099-B statement from my broker and aggregate them on one line? This is premium content

The details of the shares you sold go on Form 8949, and Schedule D collects just the column totals from that form. The instructions of Form 8949 require you to...

If I need to file an extension to complete my tax return after the IRS deadline, are there any mistakes I should avoid that involve stock grant income?

In any tax year, stock compensation income, such as from an NQSO exercise, an ISO or ESPP disqualifying disposition, or the vesting of restricted stock, can raise your income tax and make your return complex. Mistakes include not paying taxes owed with...

Do I always get a Form 1099-B for a same-day-sale cashless exercise? Are there exceptions, and if so how do I report the sale on my tax return? This is premium content

You should almost always receive Form 1099-B. The only exception occurs if certain requirements under IRS Rev. Proc. 2002-50 are met. This revenue procedure allows...

What is the cost basis for calculating gains on my tax return after I sell stock acquired from stock options, restricted stock/RSUs, performance shares, or ESPPs? This is premium content

This is an area in which mistakes often occur. The cost basis, also called the tax basis, is calculated in the following way...

After I have paid AMT for my ISO exercise and hold, what are some mistakes that I must avoid on my tax return? This is premium content

Whether you still hold the ISO stock or you sold it in the past year, once you have paid AMT your tax returns get complex. The AMT is basically a prepayment of the tax on ISOs. You will get a credit for it in subsequent years, even when you have not sold the ISO stock. This means, for example, that you still need to...

How am I taxed if I make a disqualifying disposition (e.g. sale) of ISO shares in the year I exercised the option? This is premium content

While you lose the opportunity to have the lower long-term capital gains rate apply to the difference between the exercise and sale price, the alternative minimum tax (AMT) no longer applies. You do have compensation income and perhaps short-term capital gains equal to...

I received a notice (CP-2000) from the IRS stating that, according to last year's tax return, I owe money for the cashless exercise of my stock options. I thought I paid all the taxes through withholding at exercise. How do I respond? This is premium content

You made this mistake because the stock sale at exercise does not generate any gains. The full spread between your exercise and sale prices was added to your W-2, and taxes were withheld at exercise, so you thought you did not need to report the sale on Schedule D of your Form 1040. However...

Has the likelihood of a tax audit increased? This is premium content

Yes, substantially. In addition, fluctuations of income, which can be caused by stock compensation, are a red flag that can trigger an audit. According to research...

What should I do if I forgot to report the ISO exercise/hold on my tax return but now realize I may owe AMT? This is premium content

Generally, if you find a tax-return error and the statute of limitations period has not yet ended, you are required to file...

Is it easy to calculate AMT liability?

The AMT rules and forms baffle even tax professionals. You can better understand the process by...

UPDATES! In general, how does the alternative minimum tax (AMT) calculation work?

The AMT system is complicated. Broadly, it starts by taking your adjusted gross income, subtracts your itemized deductions, makes certain negative and positive adjustments, and includes certain tax items called tax "preferences." The resulting amount...

Do I get a tax credit if I paid AMT when I exercised an ISO? How does it work? This is premium content

If you owe AMT for the tax year in which you exercised an ISO, all or a part of the amount by which your AMT liability exceeds your regular tax liability can generate a tax credit that may...

I have paid AMT, so do I get an adjustment when I sell the ISO shares to get all the taxes back? This is premium content

It's not that simple. AMT requires you to account separately for ISO shares not only at exercise but also when the shares are sold. If you paid AMT as a result of exercising ISOs, your sale of the ISO shares provides an opportunity for you to recover...

What is the tax basis of my ISO stock that I use to calculate the sale gain for AMT purposes? This is premium content

When you trigger the alternative minimum tax (AMT) from an ISO exercise, you create dual-basis stock. This means that for the purposes of calculating your AMT gain and adjustment, the basis of the shares will be calculated differently for the regular tax and for AMT. For your regular tax, the basis is...

In what ways can I pay my taxes if I don't have the money to pay them with my tax return?

If you simply lack the funds to pay your income tax, you may want to apply for a payment agreement on the...

My company's stock price has dropped substantially since I acquired shares from my stock grants, leaving me with a ruinous tax bill much larger than my gains. Is there anything I can do to reduce or eliminate the ordinary income or AMT that I owe?

To eliminate the tax, you would have had to sell the stock in the calendar year of your exercise. While some general approaches to this situation exist, only with ISO stock is there a possible escape hatch. Fortunately...

My company's stock is now essentially worthless because of securities fraud by senior executives. Can I claim a casualty or theft loss on my tax return? This is premium content

A casualty or theft loss would allow you to deduct the lost amount against your ordinary income, subject to some limits. However, Treasury regulations and court rulings would probably stand in your way. Nevertheless, what you can do is...