Tax Center

As featured in WebCPA, our Tax Center can teach you tax basics and the withholding, reporting, and filing rules that apply to stock options, ESPPs, restricted stock, and SARs. Browse an overview of this section below, or explore the subtopics to the left.

Test and improve your knowledge with our Taxes quiz and its study guide in the answer key.

Articles   (Jump to FAQs)

Avoid Costly Tax Return Mistakes And Maximize Your Profits: What Optionholders Need To Know 

Bruce Brumberg and Lynnette Khalfani
UPDATED! Tax-filing season can be onerous. If you're puzzled by a 1099-B form or don't quite know how and where to report gains and losses with stock options or ESPPs, this article is for you.

ISOs: Tax Return Tips And Traps 

Martin Nissenbaum
Tax reporting with incentive stock options (ISOs) can be tricky. Learn what you need to report on your return at each stage of your ISO's life cycle.

Reporting Company Stock Sales

The myStockOptions.com Tax Team
UPDATED! 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, employee stock purchase plans, and stock appreciation rights.

NQSOs: Tax Return Tips And Traps 

Martin Nissenbaum
Whether you complete your own tax return, want to review what your tax preparer did, or want to check what your software produced, it's important to understand basic reporting requirements of stock options. Let's review what, if anything, you need to report on your tax return.

Decisions At Grant With Restricted Stock (Part 2): The 83(b) Election Risks 

Tom Davison
Part 1 examined the basic facts of restricted stock and the decisions you need to make at grant. Part 2 explains the risks of the 83(b) election, which lets you choose to be taxed at grant rather than vesting.

Stock Option Fundamentals (Part 5): Incentive Stock Option Taxation & Alternative Minimum Tax 

Marilyn Renninger
UPDATED! You're ready to delve deeper into how and when different taxes apply to ISOs, including the AMT. You need to consider taxes at exercise and at sale to put together a strategy that maximizes the value of your options.

Final ISO Regulations Affect Stock Plan Design, Optionholders, And Advisors (Part 1) 

Ellie Kehmeier and Elizabeth Drigotas
The final rules clarify and consolidate a tangle of proposed, temporary, and final regulations, as well as other guidance, that governed the taxation of ISOs, including rules for disqualifying dispositions.

Final ISO Regulations Affect Stock Plan Design, Optionholders, And Advisors (Part 2) 

Ellie Kehmeier and Elizabeth Drigotas
The final rules clarify and consolidate a tangle of proposed, temporary, and final regulations, as well as other guidance, that governed the taxation of ISOs, including rules for the $100,000 ISO limit.

Refundable AMT Credit (Part 1): Different Rules For Old Unused Credit 

Kaye A. Thomas
UPDATED! Beginning with tax returns for the tax year 2007, certain taxpayers are able to claim old unused AMT credit even if it means getting a refund that exceeds the current year's tax. This pair of articles provides complete coverage of the refundable AMT credit, which provides a way for many people to use more AMT credit than under the regular rules.

Refundable AMT Credit (Part 2): The Calculation 

Kaye A. Thomas
UPDATED! The refundable AMT credit will be a boon to many taxpayers, especially those who encountered disaster with incentive stock options during the tech stock collapse that began in 2000. Some people are in for unpleasant surprises, though.

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FAQs   (Jump to articles)

Schedule D diagram! How are capital gains taxed when I sell my NQSO stock? 

If you hold stock acquired from the exercise of an NQSO for more than one year, the appreciation is...

Schedule D diagram! How do I report any gain that results from the sale of my NQSO shares on my federal income-tax return? 

You need to complete a Schedule D, Capital Gains and Losses, for the year of the sale of your stock and...

Schedule D diagram! I did a cashless exercise with my nonqualified stock options last year. Do I need to show the transaction on Schedule D of my Form 1040 tax return, or can I ignore the broker's statement (1099-B) since there are no gains or losses to report? 

You should still file Schedule D, which is used to report capital gains and losses...

If I did simultaneous cashless exercises of stock options from several grants during the tax year, do I need to report each sale separately on Schedule D? Can I aggregate them in one line because I exercised and sold the stock on the same day? 

Though each grant adds a different amount of money to your taxable ordinary income, the tax basis of all the shares is...

Schedule D diagram! 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? 

This differs from the situation with ISOs in which your exercise-and-hold triggers AMT and you then have a tax credit...

Schedule D diagram! Is the brokerage commission taxed? 

No. It reduces the sale proceeds you report on...

Schedule D diagram! I did a cashless exercise with my incentive stock options (ISOs). Should I report the transaction for capital gains purposes on Schedule D even though the gain is zero, and should I worry about the alternative minimum tax (AMT)? 

By selling the ISO stock at the same time you exercised it, you eliminated the AMT. The same would be true if you had sold the stock at...

Schedule D diagram! I exercised my ISOs and sold the ISO stock later in the same year. How is this reported on my tax return when the stock price at sale is higher or lower than at exercise? 

If you sold the stock at a price higher than it was on the day of your exercise, the spread at exercise is still...

Schedule D diagram! After I satisfy the ISO holding periods, how do I report a sale on my tax return? 

After you have held the stock more than two years from grant and one year from exercise, the spread between the sales and exercise prices is...

Schedule D diagram! How am I taxed if I have made a disqualifying disposition (e.g., sale) of ISO shares in a different year than the year I exercised the option? How do I report this? 

The rules are similar to those that apply to sales of ISO shares made in the same year as exercise; the difference is that you are taxed in the year of the sale of the stock...

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