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ISOs: Taxes Advanced - myStockOptions.com
IRS Form 3921 For Incentive Stock Options: What You Need To Know, And How It Can Help You Understand ISO Taxation Bruce Brumberg
Incentive stock option (ISO) exercises made during a calendar year are reported to you and the IRS on Form 3921 early in the following year. This article explains what you need to know about the information on the form, and how the form can help you better understand the complexities of ISO taxation.	ISOs: Tax-Return Tips And Traps myStockOptions Editorial Team & Contributors
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.	NEW! Living And Working In Multiple States: Challenges For Mobile Employees In The USA David Johnson and Mark Miller
Podcast included! Moving between US states, whether to relocate permanently, travel for business, or retire, can involve tax complications for people who have stock compensation. This article presents the tax issues that you may encounter when you leave your home office and cross a state line.	Show More Articles (18 more) VIDEO! Employee Stock Option Taxes: What You Need To Know Bruce Brumberg
To make the most of stock options, you must understand their taxation. In this video, learn the tax basics of nonqualified stock options (NQSOs) and incentive stock options (ISOs) through clear and concise explanations by the editor-in-chief of myStockOptions.com, along with animated examples. Running time: 4:37	Tax Planning For Options, Restricted Stock, And ESPPs After The 2013 Tax Law Changes: High-Income Taxpayers Impacted Most (Part 1) Tom Davison and William Whitaker
Notable shifts in tax rates occurred in 2013 for people with high incomes. Part 1 surveys these important tax changes and considers their impact on planning. Unless or until tax reforms become effective, the rates and income thresholds covered in this article still apply.	American Taxpayer Relief Act And Medicare Surtax: Impact On Stock Option And Restricted Stock Strategies Alan B. Ungar
Podcast included! The American Taxpayer Relief Act and the Affordable Care Act introduced tax-rate increases you must consider in deciding when to exercise stock options, when to sell company shares, and how to plan around income from restricted stock/RSU vesting. Although tax reform is on the horizon, these tax laws will remain in place until new laws are adopted.	ISOs And Wash Sales: A Trap Within A Trap Kaye Thomas
A trap awaits those who, after selling shares from exercised ISOs to avoid AMT, want to buy back the stock.	12 Tax-Return Mistakes To Avoid With Stock Options And ESPPs Bruce Brumberg and Lynnette Khalfani
UPDATES! The 2017 tax season has the potential to be confusing if you sold stock last year. This article explains common errors to avoid when reporting stock sales on your tax return and provides helpful guidance on various other tax topics involving stock options and ESPPs.	How To Avoid Paying Too Much Tax: Understanding Form 1099-B And Form 8949 For Reporting Stock Sales On Your Tax Return Bruce Brumberg
UPDATES! 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.	VIDEO! Tax-Return Reporting Of Company Stock Sales: How To Avoid Overpaying Taxes myStockOptions Tax Team
Learn the rules for reporting stock sales on your tax return, along with costly errors to avoid if the shares you sold came from stock options, restricted stock/RSUs, stock appreciation rights, or an employee stock purchase plan. Among other issues, you must understand your "cost basis" to avoid overpaying your taxes. Running time: 8:05.	VIDEO! Tax-Return Forms And Reporting Rules For Stock Sales Bruce Brumberg
Learn how to prevent costly tax return mistakes with this animated presentation on IRS Form 1099-B, IRS Form 8949, and Schedule D.	Form 8949 and Sch. D diagrams! How To Report Sales Of Company Stock On Your Tax Return myStockOptions Editorial Team
If you sold in 2016 any shares that you acquired from equity compensation or an ESPP, you will need to report the sale on the federal tax return that you file in 2017. Learn here what you must know to avoid expensive mistakes and unwanted IRS attention. Our annotated diagrams of Form 8949 and Schedule D can help you make sense of the reporting rules.	Taking An Overseas Assignment: Stock Compensation For Internationally Mobile Employees (Part 1) Mark Miller
Podcast included! Taxation for internationally mobile employees can be extremely complex. Part 1 introduces the key cross-border topics you must know about equity compensation, including the sourcing and apportioning of income.	Taking An Overseas Assignment: Stock Compensation For Internationally Mobile Employees (Part 2) Mark Miller
Podcast included! Taxation for internationally mobile employees can be extremely complex. Part 2 looks at specific scenarios, withholding taxes, and tax equalization.	Hedging Your ISO Stock Robert Gordon and Charlotte Lyman
Podcast included! Hedging stock from exercises of incentive stock options (ISOs) is complex, but it is possible in certain situations. Financial engineering can create a floor under the ISO stock while letting the capital gains holding period continue.	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.	Early-Exercise ISOs Complicated By Final IRS Regulations Michael Frank
Featuring reverse vesting, early-exercise stock options are usually granted only by pre-IPO companies. The IRS regulations on ISOs increase risk in early-exercise options, making it crucial that you understand the tax treatment.	How Tax Rate Changes Impact Your Stock Grant Strategies (Part 3): Incentive Stock Options Stanley Trotta with Robert Gordon
With tax increases in mind, now may be a good time to re-evaluate your current financial-planning strategy. Should you take action with stock options now? Part 3 looks at incentive stock options.	Stockbrokers' Secrets: Year-End Planning For ISOs John P. Barringer and Michael Beriss
Learn about year-end planning for incentive stock options. This article includes ideas related to the alternative minimum tax.	Keep Your Eyes On The Calendar Robert Gordon
Before the end of the year, review any ISO stock you are holding from earlier exercises and consider strategies for the following year. This article offers tips that apply every year. (Registration is required.)	FAQs
How will my broker know which shares to sell? Should I identify them in some way? 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...	How do I use stock that I own to exercise an option in a stock swap? What is the tax treatment? 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...	UPDATES! I have moved from one state to another. What happens with the taxes on my stock options if I live in different states during the period between grant and exercise? Generally, each state you live in determines what income is taxable and when. For administrative ease, many companies...	Show More FAQs (35 more) What are some year-end strategies for restricted stock, RSUs, and stock options? Decisions in year-end financial and tax planning depend on several factors. In this FAQ, we present several situations and some strategies that many experts suggest. Of course, you should...	What are the biggest mistakes related to stock options I can make on my tax return, and how can I avoid them? It is all too easy to make costly tax-return errors that attract unwanted IRS attention. Learn how to prevent mistakes...	What are some major issues to be aware of when reporting stock sales on my tax return? Why have these issues arisen? 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...	What tax statement will I receive from my broker after a sale of company stock? Form 1099-B or the equivalent substitute statement is necessary for the accurate completion of your tax return. Five facts you must know about this reporting to avoid tax-return mistakes are...	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? 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...	In the cost basis I use to report sales of company stock on my tax return, what part comprises the W-2 income from stock compensation or an ESPP? 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...	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? From our interpretation of the forms and their instructions, myStockOptions.com recommends the following reporting steps to avoid overpaying taxes...	The amount of my spread at exercise was not listed on the W-2 that I received from my company, even though I made a disqualifying disposition. Do I report this gain on my tax return, and how will I be taxed? This type of situation, in which the disqualifying disposition does not appear on the W-2, is more likely to occur when...	I just sold stock that I acquired from option exercises and restricted stock vesting a few years ago. How do I rediscover the cost basis for my tax return? Let's first review the tax rules and the W-2 reporting. The tax basis for...	Form 8949 and Sch. D diagrams After I have met 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 exercise price and the sale price is...	Form 8949 and Sch. D diagrams I did a cashless exercise with my incentive stock options. How do I report this on Form 8949 and Schedule D? What about the alternative minimum tax? By selling the ISO stock when you exercised it, you eliminated the spread at exercise from the...	Form 8949 and Sch. D diagrams How do I report a sale of shares in an ISO sell-to-cover exercise? To report the sale of shares in a sell-to-cover exercise, you complete Form 8949 along with Schedule D for the year of...	Form 8949 and Sch. D diagrams 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? With ISOs, it is always the sale that triggers taxes. The rules are similar to those that apply to sales of ISO shares made in the same year as exercise; the difference is that...	Form 8949 and Sch. D diagrams 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 was higher or lower than at exercise? The calculation of the amount of ordinary income and capital gain/loss will vary according to the...	Form 8949 and Sch. D diagrams When I sell my ISO shares in a disqualifying disposition, will the broker's commission reduce the amount of ordinary income on my W-2 or the amount of gross sales proceeds on my Form 8949 and Schedule D? The final IRS/Treasury regulations on ISOs clarify that the amount of ordinary income in a disqualifying disposition is...	In what ways can I pay my taxes if I don't have the money to pay them with my tax return? If you simply lack the funds to pay your income tax, you may want to apply for a payment agreement on the...	Can I use ISO stock to exercise NQSOs? Is this a disqualifying disposition that eliminates the special tax treatment for ISOs? Yes, you can use ISO stock to exercise NQSOs without disqualifying it, as the...	When I take an international assignment, will taxes on my stock compensation be equalized? 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...	What is the tax treatment of ISOs after death? For estate-tax purposes, unexercised incentive stock options (ISOs) are treated like NQSOs. But ISOs receive more favorable tax treatment at exercise than NQSOs do. Your heirs or estate get...	Can the IRS seize stock options or restricted stock under a tax lien? 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...	Even though no withholding is required for ISOs, can I still pay the federal and state taxes when I make a cashless exercise? While some companies might permit this if asked, the IRS may not allow the practice. The situation is far from clear, as the tax code...	What is the tax impact on me if my company modifies outstanding stock options or SARs, such as by extending the option term? 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...	Is the gifting or donation of stock that I acquired from an ISO exercise or ESPP purchase a disqualifying disposition? What is the tax treatment for early sale? A disqualifying disposition occurs if you sell, transfer, exchange, gift, or donate the stock that you acquired without...	Both dividends and long-term capital gains are now taxed at the same rate. Can I net my dividends from my company stock against capital loss from the sale of company stock or another security? Although qualified dividends are taxed at the...	The spread on my cashless ISO exercise is reported on my W-2 as ordinary income. Can I use my stock-trading losses to offset this income? The tax law says that you can offset losses against only the same type of income...	Is all the income that results from a disqualifying disposition of ISO shares a short-term capital gain that I can net against my capital losses on my tax return? No. All or part of it may be ordinary income. You have capital gains only when you...	My company backdated more stock options than just those of the senior executives. How does this affect employees like me and the taxation of my stock grants? 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...	If I were to sell my stock immediately upon exercise or at vesting, the transaction would violate the insider-trading laws and the laws of short-swing profits under Section 16(b) because I had a purchase within six months of the sale. Would this then delay the date of the tax treatment? The spread at exercise is what matters for the tax calculation...	Is writing call options on, or buying put options for, my ISO stock a disqualifying disposition? The put options you buy give you the right to sell the stock at a price you choose. With call options you are selling the right to someone else to "call away" the stock you own. The IRS ruled that the...	If I move to another country to work, will I still have to pay US taxes on option exercises, restricted stock vesting, and stock sales? Can I avoid double taxation? 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...	What if my company is acquired while I'm trying to meet the one-year holding period for ISO shares but the buyer pays cash for the stock before the holding period is over? Is there any way to avoid a disqualifying disposition? If, as is normally the case, you have no power to refuse or delay your stock sale, no exception...	Does the accelerated vesting of my stock options, restricted stock, and/or performance shares in a change of control or termination have any tax impact on me, such as for ISOs and golden parachute payments? 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...	Will my company be able to take a tax deduction for the value of my restricted stock, restricted stock units, performance shares, or stock options if my compensation already exceeds $1 million? 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...	UPDATES! Are my stock grants affected by the rules of deferred compensation under IRC Section 409A? A number of tax law provisions and interpretations that may affect your stock grants occur in...	My company's stock is now essentially worthless because of securities fraud by senior executives. Can I claim a casualty or theft loss on my tax return? 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...	Home