Alert: Prevent Costly Tax Mistakes (Apr. 20, 2021)
With Tax Day 2021 on May 17, we are now entering the final month of this tax-return season. If you had income from equity compensation or stock sales in 2020 and have not yet filed your federal tax return, the myStockOptions Tax Center is here to help.
This alert highlights recent additions and updates in the award-winning content of myStockOptions. You can also review a full list of our new and recently updated content.
Tax returns involving restricted stock/RSUs, stock options, or ESPPs can be confusing. Recent changes in IRS reporting rules haven't helped. Two articles at myStockOptions explain errors and nasty surprises to avoid:
- Restricted Stock & RSUs: 10 Mistakes To Avoid On Your Tax Return
- 12 Tax-Return Mistakes To Avoid With Stock Options And ESPPs
The standard flat 22% federal rate used for tax withholding on stock compensation is usually too low for most employees and executives getting these grants. Paying quarterly estimated taxes is one way to avoid an IRS penalty for tax underpayment. When the IRS extended the tax-return deadline to May 17, it kept the usual April 15 due date for the first quarterly estimated taxes of 2021. This was awkward for the many people planning to base 2021 estimated taxes on 2020 income reported in their Form 1040 tax returns. If you need to pay 2021 estimated taxes and are waiting to finish your 2020 tax return before you make your April payment, see our timely blog commentary on the issues involved and what tax pros are recommending to their clients. It's based on an earlier article at Forbes.com by our editor-in-chief Bruce Brumberg.
If you sold in 2020 shares that you acquired from equity comp or an ESPP, you need to report the sale on your tax return. Even if you sold the shares immediately at vesting, exercise, or purchase for no additional gain, you still have a reportable sale. In a special section of the Tax Center at myStockOptions, our popular annotated diagrams of Form 8949 and Schedule D show how this reporting works.
With many private tech companies launching or moving toward initial public offerings (IPOs), employees at pre-IPO companies will see changes in their equity compensation. Fortunately, research and consulting firms have extensively studied pre-IPO equity comp and its transition after an IPO. A new FAQ at myStockOptions presents some of their findings, including a shift away from stock option grants to other forms of equity compensation.
Many experts say that the early part of the year is the best time to exercise incentive stock options (ISOs). A new FAQ at myStockOptions explains why the potential exposure to the alternative minimum tax (AMT) after an ISO exercise can make this a sound approach.
Yes, according to a new survey from Fidelity Stock Plan Services. With markets strong and a younger generation that's increasingly confident with stock ownership, equity comp is booming. That's good for companies and for the employees who make the most of their stock comp. Fidelity's survey of equity plan participants found that employees who include stock comp in their financial planning are "nearly three times as likely to feel loyal to their employer" than those who do not. Findings from the survey, along with data from surveys by Schwab, E*TRADE, Morgan Stanley, and UBS, are detailed in an FAQ at myStockOptions.
ON-DEMAND WEBINAR: Preventing Tax-Return Errors For Stock Comp And Stock Sales
Watch on demand at your convenience this lively educational webinar on tax-return topics for stock comp. Understand the rules of tax-return reporting for stock options, restricted stock/RSUs, ESPPs, and sales of company shares. Learn how to avoid the common mistakes that can lead to overpaying taxes or unwanted IRS attention. This webinar is presented in 75 fast-paced minutes by Bruce Brumberg, Esq., editor-in-chief and co-founder of myStockOptions and a Forbes.com contributor. A detailed agenda is on the webinar registration page. This webinar offers 1.5 CE credits for CFPs and CEPs.
In this post-conference era, keep up your continuing professional education and earn needed CE credits at myStockOptions. In our Learning Center, myStockOptions has seven courses and exams offering CE credits for several professional designations:
- 35 CE credits for Certified Equity Professionals (CEPs): over 100% of the total requirement
- 21 CE credits for Certified Financial Planners (CFPs): 70% of the total requirement
- 21 CE credits for Certified Private Wealth Advisors (CPWAs) and Certified Investment Management Analysts (CIMAs): 52.5% of the total requirement)
- Chartered Financial Analysts (CFAs) and Certified Public Accountants (CPAs) are encouraged to take our courses and exams and include them, if possible, when they self-document their continuing professional education
Each course of study features podcasts, articles, and FAQs from myStockOptions. 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.