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Annotated diagram of Schedule DTax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.


NQSOs

Nonqualified stock options (commonly abbreviated NQSOs) are the most common type of option. Browse an overview of this section below, or explore the subtopics to the left. See also the NQSO sections of the Tax Center.

Test Your Knowledge Test and improve your knowledge with our Stock Options quiz and its study guide in the answer key.

Want to know more? Listen to our podcast on the basics of stock options.

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Restricted Stock & Stock Options: Financial Planning After Your Tax Return Is Filed And At Year-End (Part 1) This is premium content

Tom Davison and Liam Hurley
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.

Tax Planning For Options, Restricted Stock, And ESPPs After 2013 Tax Law Changes: High-Income Taxpayers Impacted Most (Part 1)

Tom Davison and William Whitaker
The beginning of 2013 brought notable shifts in tax rates for people at higher income levels. Part 1 surveys the important tax changes and considers their impact on planning.

American Taxpayer Relief Act And Medicare Surtax: Impact On Stock Option And Restricted Stock Strategies This is premium content

Alan B. Ungar
The American Taxpayer Relief Act and the Affordable Care Act introduced tax-rate increases you must consider in deciding when to exercise stock options, when to sell company shares, and how to plan around income from restricted stock/RSU vesting.

Stock Option Fundamentals (Part 3): Income Taxes And Withholding This is premium content

Marilyn Renninger
Here's some advice for financial fitness: take stock of taxes before you exercise! When and how you exercise your stock options can have a major impact on how much tax and which taxes you'll pay.

Nonqualified Stock Options: An Overview

myStockOptions.com Editorial Staff
PowerPoint presentation (in PDF) that the editorial team of myStockOptions.com developed to provide a convenient crash course on the basics of nonqualified stock options. (Premium members may request permission to use it at their companies.)

Tax Strategies With Stock Options, Restricted Stock, And Deferred Compensation This is premium content

Andy Wagner
Having both nonqualified stock options and nonqualified deferred compensation gives you a tremendous amount of flexibility to optimize your financial planning and tax situation. In this article, I explain how I have used the two plans in concert with one another.

Taking An Overseas Assignment: Stock Compensation For Internationally Mobile Employees (Part 1) This is premium content

Mark Miller
Podcast included! Taxation for internationally mobile employees can be extremely complex. Part 1 introduces the key cross-border topics you must know about equity compensation, including the sourcing and apportioning of income.

Taking An Overseas Assignment: Stock Compensation For Internationally Mobile Employees (Part 2) This is premium content

Mark Miller
Podcast included! Taxation for internationally mobile employees can be extremely complex. Part 2 looks at specific scenarios, withholding taxes, and tax equalization.

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

Bruce Brumberg and Lynnette Khalfani
The 2014 tax-return season has the potential to be more confusing than most if you sold stock in 2013. Read this article for tips on reporting stock sales and on other crucial tax-return topics.

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

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

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What are the top 10 questions I should ask about my stock options?

You should know the answers to the following questions. Understanding the topics involved will help you make the most of your stock options and prevent costly mistakes...

How is the spread at exercise of an NQSO taxed for federal income-tax purposes?

The full spread for a nonqualified stock option is included in your gross income for the year of exercise as ordinary income...

When I hold NQSO shares after exercise, what tax applies when I later sell the stock?

Capital gains tax applies on the amount of your gains above...

What are capital gains and capital losses? What are the capital gains tax rates?

Capital gain is income that arises from the sale of a capital asset. Gain from the sale of securities held for investment, such as shares acquired from stock compensation...

Is the spread at exercise of a nonqualified stock option subject to Social Security taxes? This is premium content

Yes. The spread at exercise of an NQSO is considered "wages" for the purposes of...

Is the exercise spread of NQSOs subject to federal unemployment taxes?

There is a federal tax (called FUTA) to help fund unemployment benefits. FUTA is imposed on...

Is the spread at exercise of a nonqualified stock option subject to state and local taxes? This is premium content

Many states, along with some counties and cities, impose...

May I have my employer withhold more taxes upon my exercise of an NQSO than the minimum required amount? This is premium content

Your actual tax bracket may be higher or lower than the mandatory federal withholding rate. Whether your company can withhold more depends on...

What is backup withholding? How do I prevent it or recover it? This is premium content

Backup withholding is a form of tax withholding on income from stock sales, along with interest income, dividends, or other types of payments that are reported on Form 1099. Your brokerage firm is required to make backup withholding if you are...

UPDATES! How does a non-US resident reclaim US backup withholding? This is premium content

If you are a nonresident alien and do not complete and file Form W-8BEN with the IRS upon receiving stock-sale proceeds, such as those stemming from equity awards, your brokerage firm will assess backup withholding on the proceeds. To reclaim backup withholding, take the following steps...

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