Tax Center: NQSOs: 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.

NQSOs: Tax Return Tips And Traps

The myStockOptions.com Editorial Team & Contributors
Understand the basic reporting requirements of stock options. Let's review what, if anything, you need to report on your tax return.

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.)

Stock Option Financial Planning After Your Tax Return Is Filed And At Year-End (Part 1)

Tom Davison and Liam Hurley
UPDATED! The time right after you have completed your tax return is ideal for big-picture financial planning. You can more accurately project your income and likely tax situation for the remainder of this year and the next, including AMT risk and capital-loss carry-forwards, to develop your strategy.

IRS Guide To Auditing Techniques For Stock-Based Compensation

Internal Revenue Service
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.

IRS And Treasury Warn Against Frivolous Tax Arguments Surrounding Stock Options

IRS and US Department of the Treasury
The Treasury and IRS have warned taxpayers against several frivolous arguments you should not make on tax returns. The IRS has been aggressively pursuing and winning court cases against such arguments.

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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?

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...

UPDATED! What are the biggest mistakes related to stock options 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! How do I report a sale of NQSO shares on my federal income-tax return?

You need to complete Form 8949 along with Schedule D for the year of your stock sale and file it with your IRS Form 1040 federal income-tax return. You must...

Form 8949 and Sch. D diagrams! I did a cashless exercise with my nonqualified stock options last year. Since I have no additional gains or losses from the sale, do I still need to report the transaction on Form 8949 and Schedule D of my tax return?

You should list this stock sale on your Form 8949 and include it in the totals on Schedule D. These forms are used to...

Form 8949 and Sch. D diagrams! How do I report a sale of shares in an NQSO sell-to-cover exercise?

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! I exercised NQSOs, held the stock, and now have long-term capital gains on the sale. Do I get any "credit" on my tax return for the income tax I paid for the spread at exercise?

You may have confused NQSOs with incentive stock options. This situation is different...

Form 8949 and Sch. D diagrams! If I did cashless exercises/sales of stock options from several grants simultaneously, do I need to report each sale separately on Form 8949 and Schedule D? Can I aggregate them in one line because I exercised and sold the stock on the same day?

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

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...

How do I report the income that results from the exercise of a nonqualified stock option on my federal income-tax return?

The full spread is included in your gross income for the year of exercise and is taxed in the same way that your...

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...

W-2 diagram! What will my W-2 show after I exercise nonqualified stock options?

The gain from your nonqualified stock option exercise(s) is totaled on the W-2 with other income in the following boxes...

W-2 diagram! How is an NQSO stock-swap exercise reported on my W-2?

Your W-2 totals the full gain from your NQSO exercise with your other income in the following boxes...

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! 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...

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...

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?

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...

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...

The spread on my NQSO exercise is reported on my W-2 as ordinary income. Can I use my stock-trading losses to offset this income?

The tax law says that you can offset losses against only the same type of income. This means you cannot use capital losses to offset ordinary income. However...

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 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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