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

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How To Report Sales Of Company Stock

The myStockOptions.com Tax Team
UPDATED FOR 2010! Learn how to report your sales of company stock on Schedule D of IRS Form 1040. Our comprehensive guide to Schedule D reporting covers sales of stock from nonqualified stock options, incentive stock options, restricted stock, restricted stock units, performance shares, employee stock purchase plans, and stock appreciation rights.

Tax Return Mistakes And Error Prevention

Bruce Brumberg, Editor-in-Chief
myStockOptions.com
Adapted from a webinar by the editor-in-chief of myStockOptions.com, this PowerPoint (in PDF) covers the top 10 most common tax-return errors and questions related to stock compensation, whether options, restricted stock, or ESPPs. The coverage includes a discussion of 2009 and 2010 tax-law changes that affect tax returns and planning. (Upon request, Premium Members can obtain permission to use the presentation for employees or clients.)

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UPDATED FOR 2010! What are the biggest mistakes related to stock appreciation rights (SARs) that I can make on my tax return, and how can I avoid them?

It is easy to make mistakes that lead to paying more tax than you need to, or that may even prompt a review by the IRS. Some of the mishaps are...

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...

How are stock appreciation rights taxed?

When you you exercise stock appreciation rights, depending on the plan's design and practices, you receive...

W-2 diagram! What will my W-2 show after I exercise stock appreciation rights?

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

Schedule D diagram! How do I report sales of stock appreciation rights on my federal income-tax return?

Whether you sell all the stock at exercise or hold the stock and later sell it, you need to complete a Schedule D ("Capital Gains and Losses") for the year of the sale and file it with your Form 1040 federal income-tax return. You will need to know...

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...

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

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

When I exercise my stock appreciation rights (SARs), will the amount of tax withheld cover the amount of tax that I must pay when I file my return?

Employers usually withhold federal income taxes at the flat rate required for supplemental wages, which is...

If I exercise stock appreciation rights (SARs), will I need to make estimated tax payments?

At a minimum, at the time of your SARs exercise your company will withhold taxes from the proceeds at the required federal withholding rate for supplemental income. However, depending on your income, this minimum withholding may not be enough. If so, you will need to...

Does the tax-withholding rate for supplemental income differ for amounts less than $1 million and for amounts over $1 million?

Depending on the aggregate amount of supplemental income for the year, a two-tier rate applies. The withholding rate for supplemental wages that exceed $1 million in a calendar year is...

UPDATED! Does the American Jobs Creation Act, particularly Section 409A on deferred compensation, affect my stock grants?

A number of tax law provisions and interpretations that may affect your stock grants occur in the wide-ranging American Jobs Creation Act (AJCA); the final regulations on deferred compensation under Section 409A, which adopt the...

I may leave my company to become a consultant, retire, or take another job. Will taxes still be withheld on my NQSOs, SARs, and/or restricted stock as they were when I was an employee? What if I live in another state when I exercise them?

Most companies base withholding on your employment status at the time of grant. If you work elsewhere or are retired at exercise or vesting, then...

If I did not qualify for a stimulus rebate in 2008, could I have still qualified in 2009?

Possibly. The Economic Stimulus Act of 2008 created a tax rebate for individuals that is based on income in 2007 and/or 2008. Most taxpayers qualified for the whole rebate on 2007 income, and checks were mailed to them in 2008. However, the rebate is still available to a minority of people who did not qualify on 2007 income, or who qualified for only a portion of the full rebate. People with stock compensation may fall into this group...

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