How to Report Non-Qualified Stock Options

Second, if the stock is held until at least one year after the date of exercise or two years from the date the option is granted, whichever is later , all of the gain on the sale of the stock, when recognized for income tax purposes, will be capital gain, rather than ordinary income. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area. I worked for a company back in that had an IPO. Key Terms and Dates Grant Date. The taxes owed on the gain fair market value at the time you sell, less the grant price , minus brokerage commissions and applicable fees from an exercise-and-sell transaction are deducted from the proceeds of the stock sale. Enter the specific lots you want to sell and the priority they will be sold.

Jan 31,  · Incentive Stock Option - After exercising an ISO, you should receive from your employer a Form pdf, Exercise of an Incentive Stock Option Under Section (b). This form will report important dates and values needed to determine the correct amount of capital and ordinary income (if applicable) to be reported on your return.

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1. Employer's Tax Liability on Stock Options

However, when you exercise a non-statutory stock option (NSO), you're liable for ordinary income tax on the difference between the price you paid for the stock and the current fair market value. If you exercise a non-statutory option for IBM at $/share and the current market value is $/share, you'll pay tax on the $10/share difference ($ - $ = $10). To make tax time less stressful, here’s a quick breakdown of the popular employee stock options and plans. Plus get a look into the specific tax forms needed for reporting. Plus get a look into the specific tax forms needed for reporting. Employers must report the income from a exercise of Nonqualified Stock Options in Box 12 of the Form W-2 using the code “V.” The compensation element is already included in Boxes 1, 3 (if applicable) and 5, but is also reported separately in Box 12 to clearly indicate the amount of compensation arising from an non-qualified stock option exercise.