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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.


Basics: Sales


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Articles (Jump to FAQs)

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.

How To Report Sales Of Company Stock On Your Tax Return

The myStockOptions.com Tax Team
Learn how to report sales of stock on your tax return. Annotated diagrams of Form 8949 and Schedule D help you make sense of the reporting rules.

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FAQs (Jump to articles)

What are the big changes in 2015 with reporting stock sales on my tax return? Why have these changes occurred?

Major changes have occurred in the tax reporting for stock sales during the past few years, making accurate tax-return reporting more complex and difficult...

UPDATES! How have IRS Form 1099-B and cost-basis reporting changed for sales of stock acquired from my stock options, restricted stock, or ESPP? What do I need to do differently because of the changes? This is premium content

If you sold shares during the calendar year, your brokerage firm will issue IRS Form 1099-B by mid-February of the following year. This is an important document that you must have to complete your tax return for the year of sale...

UPDATES! 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? This is premium content

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...

Do I need to sell my shares at exercise?

The exercise and the sale are separate. Whether you sell the shares at the time you exercise stock options depends on various factors. At exercise, you can usually...

Do I need to sell my shares at the vesting of restricted stock, RSUs, or performance shares?

The vesting of restricted stock, RSUs, or performance shares is separate from the sale of the shares. Whether you sell the shares at vesting depends on various factors, including...

How do I sell shares that I acquired through a stock option exercise, restricted stock vesting, or ESPP?

Whether you hold stock certificates, hold your shares in a brokerage account, or have an online trading account, you will need the assistance of a stockbroker...

Why does my company appoint several brokerage firms or transfer agents for me to use when I exercise my options, or for the deposit of my restricted stock and ESPP stock? This is premium content

Your company uses one or more "captive" brokerage firms or a transfer agent for...

Must I use a company-approved broker to sell shares?

Not necessarily. If you must exercise your option with a...

How will my broker know which shares to sell? Should I identify them in some way? This is premium content

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...

What are the different types of sell orders I can place with my option exercise? This is premium content

You can place four types of sell orders, depending on your brokerage firm and company rules...

Why did the brokerage firm that my company requires me to use for option exercises hold the sales proceeds and stock in my account and not send me a check? This is premium content

The default method for the distribution of sales proceeds in a cashless exercise is holding them in an account at the brokerage firm...

Who pays the brokerage sales commission? This is premium content

While you rarely pay commission for the option exercise or ESPP purchase, you owe it when you...

Form 8949 and Sch. D diagrams! Is the brokerage commission taxed? This is premium content

The commission either reduced the sale proceeds or was reported...

How is capital gain calculated?

The amount of your capital gain is the difference between your sales price and your tax basis in the stock. However, with stock from equity compensation, your tax basis can be harder to determine. It is...

What happens if I have a capital gain from one sale of company stock and a capital loss from another sale of company stock or another security? This is premium content

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...

When do I receive the sales proceeds, and how will I know the amount? This is premium content

Your broker will periodically send you transaction statements...

If my company or a third party buys my employee stock options for cash, how is this taxed? This is premium content

You recognize ordinary income for the full value of the cash payment. Any deferred portion of the cash sale proceeds is not taxable until...

UPDATES! What is a wash sale? This is premium content

If you sell company shares for a loss and buy more company shares within 30 calendar days before or after the loss transaction, the federal tax code will...

UPDATES! 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? This is premium content

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

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? This is premium content

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...

If my company requires me to have a foreign bank or brokerage account because of the stock plan, what do I need to know about the FBAR and FATCA reporting rules? This is premium content

Under the FBAR and FATCA rules, you may have special IRS reporting requirements if you hold assets in a bank outside the US. This FAQ explains the requirements and the severe penalties that the IRS imposes for noncompliance...

What are "blackout periods" and "window periods"? This is premium content

Blackout periods are times when you are prohibited from trading your company's securities, and window periods are times when you are allowed to trade. Some companies also prohibit...

How do blackout periods affect my ability to sell shares? This is premium content

To prevent insider trading, most companies adopt rules that stop all employees from trading during certain periods. This means that...

Can I sell my company stock through a blind trust, or another type of trust, as a defense against insider trading? This is premium content

Using a blind trust goes beyond the protections of Rule 10b5-1 plans, yet has more restrictions. These are irrevocable grantor trusts with...

Can proceeds from stock options be garnished to pay a creditor, an ex-spouse, or a tax authority? This is premium content

"Garnishment" is a legal process in which a debtor pays an obligation with property and/or goods that are owed to or belong to the debtor but are in the hands of a third party. Whether this remedy applies to stock options depends...

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