Tax Center: ESPPs: W-2s & Tax Returns

The Revised Form 1099-B & New Form 8949 For Reporting Stock Sales On Your Tax Return: How To Avoid Paying Too Much Tax

Bruce Brumberg
NEW! 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.

How To Report Sales Of Company Stock On Your Tax Return

The myStockOptions.com Tax Team
UPDATED FOR 2012! Learn how to report your sales of stock on the new Form 8949 and revised Schedule D of IRS Form 1040.

VIDEO! New Tax Return Forms & Reporting Rules For Stock Sales

Bruce Brumberg
If there's a way to make learning about tax forms fun, we'll try it. Watch and hear this animated presentation on the expanded IRS Form 1099-B, the new IRS Form 8949, and the revised Schedule D. Learn now to prevent costly tax return mistakes later!

Avoid Tax Return Mistakes With Stock Options & ESPPs:
What You Need To Know In 2012

Bruce Brumberg and Lynnette Khalfani
UPDATED! This tax return season has the potential to be more confusing than most if you sold stock last year. You must now file the new IRS Form 8949 along with the revised Schedule D. This change stems from the expansion of the information that brokers must report to you on IRS Form 1099-B. Read this article for tips on these and other crucial tax return topics.

Tax Return Mistakes And Error Prevention In 2012

Bruce Brumberg, Editor-in-Chief
myStockOptions.com
UPDATED! Adapted from a webinar by the editor-in-chief of myStockOptions.com, this presentation covers the top 10 most common tax-return errors and questions related to stock compensation, whether options, restricted stock, or ESPPs. The presentation is completely updated for the expanded Form 1099-B, the new Form 8949, and the revised Schedule D. (Upon request, Premium Members can obtain permission to use the presentation for employees or clients.)

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UPDATED! What are the biggest mistakes related to my employee stock purchase plan that I can make on my tax return, and how can I avoid them?

It is easy to make tax return mistakes that lead to paying more than necessary or (perhaps worse) an IRS review. This tax season in particular will be more confusing than most because of the new Form 1099-B, the new Form 8949, and the significantly revised Schedule D...

Form 8949 and Sch. D diagrams! If I make a disqualifying disposition with my ESPP stock, how do I report the sale on Form 8949 and Schedule D of my tax return?

You report the sale on Form 8949 and Schedule D to show your capital gain or loss, regardless of any actual gain or loss. This is the difference between...

Form 8949 and Sch. D diagrams! If I sell ESPP shares after the required holding periods, how do I report the sale on my Form 8949 and Schedule D?

If you sell ESPP shares in a qualifying disposition, you still realize ordinary income in the year of sale. You should...

Form 8949 and Sch. D diagrams! My company's ESPP is not tax-qualified under Section 423 of the Internal Revenue Code. How do I report any gain that results from the sale of my ESPP shares on my federal income-tax return?

The new Form 8949 is where you list the details of each stock sale, while Schedule D aggregates the column totals from this form to report your total long-term and short-term capital gains and losses. However...

NEW! What are the big changes with reporting stock sales this year on my tax return? Why have these changes occurred?

For people who sold shares in 2011, this tax season presents major changes in tax reporting and filing...

What tax statement will I receive from my broker after a sale of company stock I acquired by stock option exercise, restricted stock vesting, or ESPP purchase?

You will need to gather certain information to complete your tax return. The broker will send you IRS Form 1099-B for the proceeds...

NEW! How is IRS Form 1099-B changing for sales of stock acquired from my stock options, restricted stock, or ESPP?

More information is now reported on this form than in past years. This may prove to be more helpful, but it also may be more confusing. Issued to you by your brokerage firm, IRS Form 1099-B is an important document that you must have to complete your tax return. Recent legislation has changed the form in significant ways that you must understand...

NEW! 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?

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...

NEW! 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?

The new Form 8949 is where you now list the details of each stock sale on your tax return, while the revised Schedule D is where you now merely aggregate the column totals from Form 8949 to report your total long-term and short-term gains and losses. From our interpretation of the forms and their instructions, myStockOptions.com recommends the following reporting steps to avoid overpaying taxes...

What is the tax basis for calculating gains on Form 8949 and Schedule D of my tax return after I sell stock acquired from stock options, restricted stock/RSUs, performance shares, or ESPPs?

The tax basis is the purchase price plus the amount of ordinary income shown on your Form W-2. In most (though not all) situations, you use the fair market value (FMV) on the date of option exercise, restricted stock/RSU vesting, or ESPP purchase. The table below lists the tax basis for each type of stock compensation...

What, if anything, shows up on my W-2 when I purchase discounted shares of stock under an ESPP?

Nothing in connection with an ESPP purchase is reflected on your Form W-2 unless...

W-2 diagram! If I make a disqualifying disposition with my ESPP stock, what will appear on my W-2?

With a tax-qualified ESPP, nothing appears on your W-2 until you sell the shares. In that year, income is reported in the following boxes of your W-2...

W-2 diagram! My company's employee stock purchase plan is not tax-qualified under Section 423 of the Internal Revenue Code. What will my W-2 show after an ESPP purchase?

The gain from your ESPP purchase is totaled on the W-2 with other income in the following boxes...

W-2 diagram! If I sell ESPP shares after the required holding periods, what will appear on my W-2?

If you sell ESPP shares in a qualifying disposition, you still...

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

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

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

Stock compensation income can raise your income tax and make your tax return complex. The IRS has a form that lets you apply for an automatic six-month extension for the due date of your tax return (until mid-October). Mistakes include not paying taxes owed with...

UPDATED! Has the likelihood of a tax audit increased?

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...

Can I ever have ordinary income but no actual gain on sales of ESPP stock?

Yes, when the market price of the stock has dropped after purchase and you make a disqualifying disposition of the shares...

I acquired stock from option exercises and restricted stock vesting a few years ago. When I sell the stock, how do I rediscover the cost basis for my tax return?

Let's first review the tax rules and the W-2 reporting. The tax basis for...

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?

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...

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