How does tax reform affect my tax return this year?
Restricted stock and RSUs: the biggest tax-return mistakes to avoid
Tax-return content: videos, articles, annotated IRS forms, and podcasts
Beware: IRS penalty for late filing has increased
Register for our financial-planning conference (June 18, 2018)
myStockOptions Learning Center offers 100% of the CE requirement for CEPs



Amid the high-profile changes introduced in 2018 by the Tax Cuts & Jobs Act, this newsletter summarizes what's new for this tax-return season and provides an introduction to our perennially popular tax-return content. While the new tax law doesn't affect 2017 taxes, this tax season brings more potential than ever for confusion, uncertainty, and expensive mistakes. Major changes occurred in the tax reporting for stock sales during the past few years. These have made accurate tax-return reporting more complex and difficult for anyone who has sold shares acquired from equity compensation. Mistakes can be painful not only because they can cause you to overpay your federal taxes but also because they can draw unwanted attention from IRS auditors. If you received income from equity compensation or sold shares in 2017, you must understand the related reporting on IRS tax forms to avoid making costly errors.

FREE APP! Have stock compensation? Work with stock plans? Both? Now you can keep our valuable equity comp expertise at your fingertips with our free app for iPhones, iPads, and Android smartphones: Stock Compensation Glossary, available from the App Store (for Apple devices) and from Google Play (for Android devices). Based on the popular glossary at, this handy, searchable reference guide defines almost 1,000 terms in the areas of equity compensation and executive compensation, including terms used in the related taxation, corporate accounting, and securities law.

Thank you for using If you do not yet subscribe to Premium or Pro Membership, giving full access to our content and tools, year-end and tax-return season is a great time to upgrade. All of our content and tools are also available for licensing.

Don't want to wait for our quarterly newsletter updates? The Blog is the best way to stay on top of equity compensation news and the latest developments at our website. You can also follow us on Twitter.

—Bruce Brumberg (Editor-in-Chief)

Two FAQs On Tax Returns Involving Stock Compensation And Company Shares

How does tax reform affect my tax return this year?

Effective in 2018, the Tax Cuts & Jobs Act has no impact on 2017 taxes or 2017 tax returns filed in 2018. Income from stock compensation or stock sales in 2017 is subject to the same rates and rules that have applied in each of the past few years. This website's Tax Center has guidance on tax-return reporting for stock compensation, including illustrated examples of the key forms. An FAQ at myStockOptions presents a brief overview of major issues to be aware of in your tax-return reporting this year.

A special FAQ explains the future impact on tax planning that the Tax Cuts & Jobs Act will have. The core tax treatment of stock compensation has not changed. However, the new law has provisions that affect in some way the individual taxation of stock compensation. The Tax Cuts & Jobs Act keeps the current seven income tax brackets, reducing the rates and changing the income thresholds that apply. The rates are now 10%, 12%, 22%, 24%, 32%, 35%, and 37%, with the top bracket starting at $600,000 for joint filers ($500,000 for single filers). The flat supplemental wage rate for federal income tax withholding on stock compensation is based on the seven brackets. For amounts up to $1 million it is linked to the third lowest rate (22%). For amounts over $1 million it is linked to the highest rate (37%).

As shown by the table below, the 22% rate of withholding may not cover the actual taxes you will owe on the additional taxable income from stock compensation. You must therefore know the tax bracket for your total income and assess the need to put money aside or pay estimated taxes.

10% $0 to $9,525 $0 to $19,050
12% $9,526 to $38,700 $19,051 to $77,400
22% $38,701 to $82,500 $77,401 to $165,000
24% $82,501 to $157,500 $165,001 to $315,000
32% $157,501 to $200,000 $315,001 to $400,000
35% $200,001 to $500,000 $400,001 to $600,000
37% Over $500,000 Over $600,000

For stock compensation, multi-year planning remains useful to minimize when the added income pushes you into a higher tax bracket.

The legislation has also changed the calculation of the alternative minimum tax (AMT) in ways that will reduce the likelihood of triggering the AMT. Below are the new numbers in the AMT calculation (to be adjusted annually for inflation).

  • The 2018 AMT income exemption amount rises to $70,300 (from $54,300) for single filers and to $109,400 (from $84,500) for married joint filers.
  • The income where this AMT income exemption starts to phase out in 2018 is substantially adjusted upward to begin at $500,000 for individuals (up from $120,700 in 2017) and $1,000,000 (up from $160,900 in 2017) for married couples.

These higher AMT income exemption amounts, and the much higher income point where the phaseout starts, make it much less likely that ISOs will trigger the AMT. With fewer employees at risk of triggering the AMT by exercising ISOs and holding the shares, companies may start to grant ISOs more frequently, given their potential tax advantages for plan participants.

For more on the impact that the Tax Cuts & Jobs Act will have on stock compensation, including a new tax-friendly type of equity award that is available for privately held companies to grant to their employees, see the full FAQ.

Return to table of contents

Eaton Vance: Your exposure, our expertise

Eaton Vance offers strategies and tools to help financial advisors and investors:

  • Diversify or manage the risks of concentrated stock holdings
  • Design a tax-managed completion portfolio around a concentrated security
  • Enhance risk-adjusted portfolio returns and generate current income
  • Minimize capital gains and other taxes

Financial advisors: Call our Wealth Strategies Group at 617-672-8500.

Return to table of contents

What are the biggest mistakes with restricted stock or RSUs that I can make on my tax return, and how can I avoid them?

1. After selling any or all of the shares at vesting, you still need to report this sale on Form 8949 and Schedule D even though you have no "gain" beyond what is part of your compensation income. You may, however, have a small gain or loss, depending on how your company calculates the stock value at vesting and any commissions and fees for the stock sale. (For an annotated example of how to report the restricted stock sale on these forms, see another FAQ.)

Alert: If the IRS were to receive a report of your gross sale proceeds from your broker (on Form 1099-B) but without a corresponding report of the sale on your Form 8949, the IRS would think you had failed to report the gain on the sale. Assuming a tax basis of $0, the IRS computers would then automatically send you a notice for the taxes due on the full amount of the proceeds.

2. Even though you never purchased the stock, your tax basis for reporting the stock sale in column (e) on Form 8949 is the amount of compensation income at vesting that appeared on your W-2 (you already reported it on your tax return). If you made a Section 83(b) election (not available for RSUs), the basis amount is the value at grant on your W-2. Do not assume that, because you did not pay any money to purchase the stock or exercise anything, your tax basis is zero. Otherwise, you will pay double tax on the value of the shares at vesting. For the cost basis, Box 1e of your 1099-B may be blank (or show $0) only because brokers are not required to report the cost basis for noncovered securities, such as restricted stock and RSUs (some brokers may report the basis on the 1099-B that you receive but not on what they report to the IRS). See a related FAQ with annotated diagrams of Form 8949 and Schedule D that show how you report stock sales after you have held the stock at vesting.

3. You will also mistakenly double-report income if you do not realize that your W-2 income in Box 1, reported on Line 7 of Form 1040, already includes stock compensation income. Wrongly thinking it was left out may prompt you to erroneously report the income on your Form 1040 in the line for "Other income" (Line 21 on the 2017 form). Doing this will cause the income to be taxed twice as ordinary income, as it was already included in the W-2 income reported on Line 7. You use Line 21 only if your company mistakenly omits the income from your W-2 or 1099-MISC.

4. If you surrendered or sold shares at vesting to pay the withholding tax, you want to report any actual market sale of shares on your Form 8949. For a share surrender in which you receive only the net after-tax shares in your account, speak with your own tax advisor about the need to report this (see a related FAQ on the issue). Alternatively, if you sold only some of the shares (e.g. for taxes), you don't want to report on your Form 8949 the cost basis for all the shares vested. This would result in a much larger tax basis and a capital loss for these shares sold.

Alert: When you later sell the remaining shares in your grant, remember to exclude from your Form 8949 at that time the shares used earlier to withhold taxes (i.e. do not use the full number of granted shares). Otherwise you'll report more shares than you sold, as explained in a related FAQ.

To see the next four key mistakes to avoid, including those involving stock-sale reporting on Form 8949 and the capital gains holding period, see the full FAQ in the Tax Center.

Return to table of contents

AdvisorFind Directory
Find a financial, tax, or legal advisor with experience in stock compensation

Stock compensation raises many questions.

  • How much should you contribute to your ESPP?
  • When should you exercise stock options?
  • Should you sell or hold restricted stock at vesting?
  • How can you diversify your company stock holdings?
  • How can you minimize your tax bill?
  • How do you negotiate for stock compensation in your employment agreement?

While is a good place to learn about concepts, issues, and general strategies in equity compensation, at some point you may need an advisor to help with your unique situation. Yet finding a good advisor can be hard when you are busy and don't know where to start. The AdvisorFind Directory from is for you.

  • Identify and contact an expert who can provide specialized professional guidance on equity compensation.
  • Search for advisors by geographical area, type of advisor, years of experience, minimum portfolio size, and other key criteria.
  • Look up resources for performing background checks on advisors.

Searching AdvisorFind is free and does not require registration at

Return to table of contents

Articles, Annotated Diagrams, Videos, And Podcasts On Tax Returns With Stock Compensation

The list below summarizes our exclusive articles, FAQs, diagrams, videos, and podcasts on tax-return topics relating to stock compensation.

FORM 8949 AND SCH. D DIAGRAMS: How To Report Sales Of Company Stock
Understand how to report your sales of company stock on Form 8949 and Schedule D of IRS Form 1040. Our comprehensive guide to tax-return reporting features our popular FAQs with annotated diagrams of the IRS forms. Covered topics include 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.

ARTICLE: 12 Tax-Return Mistakes To Avoid With Stock Options And ESPPs
Puzzled by your W-2 or 1099-B? Don't know how and where to report sales of company stock on your tax return? Get insightful tips to avoid errors that can prove costly!

ARTICLE: Restricted Stock & RSUs: 10 Tax-Return Mistakes To Avoid
Restricted stock or restricted stock units (RSUs), whether granted along with or instead of stock options, bring their own special issues to your tax return.

FORM W-2 DIAGRAMS: Understand how stock compensation is reported on your Form W-2. Our comprehensive guide to tax-return reporting includes our popular FAQs with annotated diagrams of Form W-2 for all types of equity awards and ESPPs.

VIDEO: Tax-Return Reporting Of Company Stock Sales: How To Avoid Overpaying Taxes
In plain English, the tax experts at discuss the rules for reporting stock sales on your tax return, along with major errors to avoid if the shares you sold came from stock options, restricted stock/RSUs, stock appreciation rights, or an employee stock purchase plan. The video demystifies the "cost basis" of shares acquired from equity compensation and explains why it is crucial to understand your cost basis to avoid overpaying your taxes. (Running time: 8:05)

VIDEO: Tax-Return Forms & Reporting Rules For Stock Sales
If there's a way to make learning about tax forms fun, we'll try it. In this engaging video, learn how to prevent costly tax return mistakes with our animated presentation on IRS Form 1099-B, IRS Form 8949, and Schedule D. (Running time: 8:08)

ARTICLE: Avoid Overpaying Tax On Stock Sales: Understand Forms 1099-B And 8949 For Tax-Return Reporting
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. If you are not aware of the reporting rules, the resulting confusion may lead you to pay more taxes than you have to. This article explains how to avoid mistakes.

PODCAST: Reporting Stock Sales On Your Tax Return
In this engaging audio, you can get the latest on Form 1099-B, Form 8949, Schedule D, and other tax-return topics involving stock compensation.

PODCAST: Tax Return Tips & Avoiding Reporting Mistakes
Listen to this audio to learn about the tax-return reporting for stock compensation and how to avoid expensive mistakes that attract unwanted IRS attention.

ARTICLE: NQSOs: Tax Return Tips And Traps
Whether you complete your own tax return or just want to review what your tax preparer did, it's important to understand basic reporting requirements for nonqualified stock options. Learn what you need to report on your tax return at each stage of the NQSO life cycle.

ARTICLE: ISOs: Tax Return Tips And Traps
Incentive stock options bring special complexities to tax returns, especially when the alternative minimum tax is involved.

ARTICLE: Stock Option Financial Planning After Your Tax Return Is Filed And At Year-End (Parts 1 and 2)
The time just after the filing of 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.

In addition to these resources, has numerous FAQs on tax-return topics, including a helpful FAQ on a range of ESPP tax-return mistakes.

Return to table of contents

Beware: IRS Penalty For Late Filing Of Tax Returns Increased In 2017

In 2016, the Trade Facilitation and Trade Enforcement Act of 2015 (the "customs bill") was signed into law by President Barack Obama. The legislation included a provision increasing the penalty for the failure to file federal tax returns on time. Under the prior law, a penalty of $135 or 100% of unpaid tax, which ever is lower, applied when a tax return was filed more than 60 days after the due date. In 2017, the penalty rose to the lesser of either $205 or 100% of unpaid tax.

For most US taxpayers, the deadline for filing federal tax returns with the IRS for tax year 2017 is April 17, 2018. To gain an automatic six-month extension for the due date of your tax return (until mid-October), you can use IRS Form 4868, Application For Automatic Extension Of Time To File.

Alert: If you can file your tax return by the deadline but cannot pay all of your tax bill, do not file an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the remaining amount you owe. See our FAQ on arranging an installment plan with the IRS.

The extension applies only to the filing of your tax return. It does not apply to any tax you may owe, which you must pay by the original IRS filing deadline to avoid penalties. You must accurately estimate how much tax you need to pay. By paying 100% of your tax when you file the extension, you avoid interest and penalties. To avoid the failure-to-file penalty on what you owe, you must file the extension no later than the original deadline of your return. For more details, see our FAQ on filing extensions.

In any tax year, stock compensation income, such as from an NQSO exercise, an ISO or ESPP disqualifying disposition, or the vesting of restricted stock, can raise your income tax and make your return complex. For help, see a special section of this website called Reporting Company Stock Sales.

Return to table of contents

Register For The First myStockOptions Conference (June 18, 2018)

We are holding our first-ever conference, a one-day event: Financial Planning for Public Company Executives & Directors (Monday, June 18, 2018). Taking place in the Boston area, this is a must-attend national conference for financial, tax, and legal advisors working with or wanting to counsel executives, directors, and high-net-worth employees. We have a wonderful group of expert speakers and a comprehensive agenda of sessions on various stock-related and financial-planning topics:

  • trends of importance to advisors
  • tax, estate, and SEC-related planning challenges
  • methods for attracting and advising high-net-worth clients
  • case studies and other examples of successful planning strategies

CE credits will be available! Register at the conference website or contact us for more information (617-734-1979,

Return to table of contents

video iconInsider Trading Prevention And Education: Think Twice Video And Intranet Series
Request free previews at the Think Twice website

Insider-trading prosecutions are a major priority of the SEC and the Justice Department. For two decades, the dramatic Think Twice video series has been a vital training and compliance resource for thousands of corporations and law firms trying to prevent insider-trading violations. The Think Twice videos are celebrated for enhancing the value of corporate education by entertaining viewers with compelling stories.

Used by over 1,000 companies and developed with input from the SEC Enforcement Division, these powerful and memorable story-lines will drive home key points on:

  • what insider trading is
  • the penalties and consequences
  • how the SEC discovers illegal activity
  • what happens if illegal tipping or trading is suspected
  • how SEC investigations are conducted

For more information on the Think Twice video series, and a free white paper on insider trading prevention and education, see the Think Twice website. Both DVD and VHS formats are available. Qualified corporate buyers, including new IPO companies, can request free previews. Intranet licensing is available.

Return to table of contents

Need CE Credits? Learning Centers At And Offer Credits For CEPs, CFPs, And Other Professionals

Professionals with continuing education requirements to meet will be relieved to learn that and its sibling website have online self-study courses and exams offering continuing-education credits.

At, the Learning Center offers:

  • 30 continuing-education credits for Certified Equity Professionals (CEPs): 100% of the total requirement
  • 15 continuing-education credits for Certified Financial Planners (CFPs): 50% of the total requirement
  • 15 continuing-education credits for Certified Private Wealth Advisors (CPWAs) and Certified Investment Management Analysts (CIMAs): 37.5% of the total requirement

Each course of study features podcasts, articles, and FAQs from They are woven into a dynamic, interactive learning tool that teaches the topics in a memorable way. The answer key for each exam also links to relevant content on the site for further reading and learning.

Built on a similar model, the the Learning Center on nonqualified deferred compensation offers up to 6 continuing education credits for Certified Financial Planners, 6 Professional Achievement in Continuing Education (PACE) credit hours for CLU® and ChFC® certifications, and up to 12 CPE hours for credentialed ASPPA members.

Return to table of contents

Subscription And Licensing Information

If you found this update from useful, please share it with your friends and colleagues, but do not copy or customize the text itself for your company's use without express permission.

TO SUBSCRIBE: Visit and register as a new user. Be sure to check the box for our email newsletters.


Return to table of contents