Tom Davison and Liam Hurley
UPDATED FOR 2013! 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.
Alan B. Ungar
NEW! The American Taxpayer Relief Act and the Affordable Care Act introduced tax-rate increases you need to consider in deciding when to exercise stock options, when to sell company stock, and how to plan around income from restricted stock vesting. This article explains the changes in tax law and suggests strategies for minimizing the new taxes.
Andy Wagner
NEW! 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.
Mark Miller
For employees and executives, international travel and relocation are increasingly common. The taxation of "mobile employees" is always complex, and never more than with equity compensation. Part 1 introduces the key concepts and rules, including the sourcing and apportioning of income.
Mark Miller
International assignments or relocations can present attractive opportunities for career advancement. However, the taxation of equity compensation for mobile employees raises complex issues. Part 2 looks at specific scenarios, withholding taxes, and tax equalization.
The myStockOptions.com Tax Team
UPDATED FOR 2013! Learn how to report your sales of stock on the new Form 8949 and revised Schedule D of IRS Form 1040.
Bruce Brumberg and Lynnette Khalfani
UPDATED FOR 2013! This tax return season has the potential to be more confusing than most if you sold stock last year. Read this article for tips on reporting stock sales and on other crucial tax return topics.
Bruce Brumberg
UPDATED FOR 2013! If there's a way to make learning about tax forms fun, we'll try it. Learn how to prevent costly tax return mistakes with this animated presentation on IRS Form 1099-B, IRS Form 8949, and Schedule D.
Bruce Brumberg
UPDATED FOR 2013! 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.
Stanley Trotta with Robert Gordon
With tax increases in mind, now may be a good time to re-evaluate your current financial-planning strategy for equity compensation and company stock holdings to determine whether action is required before new rates apply. Part 1 looks at nonqualified stock options.
W.E.B. Bantling and Michael Beriss
The time for tax planning is
before the year ends; tax season is too late. Learn about several year-end ideas that apply to nonqualified stock options (NQSOs) and restricted stock/RSUs. Meanwhile, look ahead at the likelihood of tax rate changes under President Obama.
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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FAQ Table of Contents:
Withholding
Your actual tax bracket may be higher or lower than the mandatory federal withholding rate. Whether your company can withhold more depends on...
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...
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, the following should be...
At a minimum, when you exercise your stock options, your company will withhold taxes 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...
To calculate the taxable income at exercise, your company subtracts your exercise price from the fair market value (FMV) of the stock at exercise. Approaches to this FMV calculation depend on...
When you have more than one job in a year, each company must withhold Social Security tax without considering what the other company withholds. The result could be...
In some ways they are similar, though different if you were an employee at the time of grant. The tax treatment of NQSOs is...
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W-2s & Tax Returns
The gain from your nonqualified stock option exercise(s) is totaled on the W-2 with other income in the following boxes...
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...
You will need to gather certain information to complete your tax return. The broker will send you IRS Form 1099-B for the proceeds...
Major changes in the tax reporting and filing for stock sales became effective in 2012 (i.e. starting with stock sales made in 2011). The revised reporting and filing rules now apply every tax season...
Your brokerage firm issues
IRS Form 1099-B by mid-February in the year following the year of sale. Form 1099-B is an important document that you must have to complete your tax return...
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...
The full spread is included in your gross income for the year of exercise and is taxed in the same way that your...
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...
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...
To report the sale of shares in a sell-to-cover exercise, you complete Form 8949 along with Schedule D for the year of...
You should list this stock sale on your Form 8949 and include it in the totals on Schedule D. These forms are used to...
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...
Let's first review the tax rules and the W-2 reporting. The tax basis for...
You may have confused NQSOs with incentive stock options. This situation is different...
If you simply lack the funds to pay your income tax, you may want to apply for a payment agreement on the...
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...
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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Netting Gains and Losses
You have a capital loss for federal income tax purposes...
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...
Tax considerations alone should not drive the choice of what stock you sell. For example, if you are holding appreciated company stock from a nonqualified stock option (NQSO) exercise or restricted stock vesting, you will be taxed on...
The treatment for tax-loss harvesting is similar to that of owning and selling any two stocks. The income-tax reporting for multiple transactions is...
Yes, the benefits from tax-loss harvesting are the same as those for selling any stock at a loss...
This is wishful thinking, because these are two separate transactions. It does not make sense to...
No. Although you have performed services for the company and your options clearly have economic value...
Although qualified dividends are taxed at the...
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Advanced
This depends on several factors. Below we present 10 ideas...
If you have more than one batch of company stock, you are responsible for providing your broker with enough information to identify which shares to sell. If you do not specify...
As other FAQs and articles in this section explain, there is no universal plan for everybody. With that said, we present some general advice from experts...
At some companies, international assignments are often accompanied by what is commonly called an equalization package. To give you an incentive to accept the international assignment, the company agrees to...
No. Since the spread between the exercise and market price for NQSOs is taxed as ordinary income upon exercise, the tax is fixed on that date...
The IRS can seize your stock options if it applies a federal tax lien to you for unpaid taxes. After seizing your stock options, the IRS can also...
At a minimum, do not expect any new stock option grants with an exercise price lower than the market price on the grant date. The tax treatment varies by type of grant. Some of the companies involved in the controversial backdating of stock options restricted employees from...
The United States taxes the worldwide income of US citizens regardless of whether the income arises from activities in the US. In addition, the other country may impose taxes too. But the US has tax treaties with certain nations to help taxpayers avoid double taxation...
Generally, each state you live in determines what income is taxable and when. For administrative ease, many companies...
With approval from the board, and perhaps also shareholders, your company can modify outstanding grants in a way that is consistent with its stock plan. However, it should avoid tax pitfalls for you and the company, such as...
A number of tax law provisions that may affect your stock grants were introduced in the American Jobs Creation Act (AJCA); the final regulations on deferred compensation under IRC Section 409A, which adopt the...
A "stock swap" or "stock for stock" exercise is a stock option exercise in which the exercise price is paid with shares of company stock you own...
To have beneficial tax-qualified status, grants of ISOs must have certain characteristics and must follow...
The tax treatment is fixed at the time you exercise NQSOs, regardless of the future direction of the...
The spread at exercise is what matters for the tax calculation...
Yes. The option exercise and the...
Stock options are usually granted with an exercise price equal to the fair market value (FMV) of a share of company stock on the grant date of the option. Once it falls below the FMV they become discounted stock options, which raise multiple issues, including...
With stock grants of normal size, you face no tax impact beyond the standard tax treatment. ISOs may be converted to NQSOs should any acceleration of vesting cause...
Under a limited number of stock plans, it used to be possible to defer delivery of shares, and related taxes, to some time after exercise or vesting. However, under Section 409A of the American Jobs Creation Act of 2004 (AJCA), this type of deferred compensation is...
This depends on what triggers vesting. Section 162(m) of the tax code limits your company's deduction to $1 million unless a senior officer's compensation over this amount meets the performance-based exception. Stock grants are structured to meet this by...
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Tax 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.
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Stock Option Financial Planning After Your Tax Return Is Filed And At Year-End (Part 1) 
