04-04-2019 02:06 PM I’m confused on how to report non-statutory stock options on the 1040. My client exercised his option to buy company stock and then sold the stock the same day. His W-2 shows Code V in box 12 for $10,712.64. I have no problem with the W-2.
What does it mean to have non statutory stock options?
Non-statutory stock options are also known as a non-qualified stock options. These are a stock option for employees, but also for vendors, the board of directors, contractors, and anyone else the company issues them to. They are named as such because the will not qualify within the strict guidelines of ISOs.
How to report the exercise of an incentive stock option?
Incentive Stock Option – After exercising an ISO, you should receive from your employer a Form 3921, Exercise of an Incentive Stock Option Under Section 422 (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.
Can a nonstatutory stock option be granted under an ISO plan?
Stock options that are granted neither under an employee stock purchase plan nor an ISO plan are nonstatutory stock options. Refer to Publication 525, Taxable and Nontaxable Income for assistance in determining whether you’ve been granted a statutory or a nonstatutory stock option.
How to report nonstatutory stock options on W-2?
You’ll see the amount listed on your W-2 if you’re an employee, or on a 1099 form for non-employees. Add the original purchase price to the taxable income you reported on the option. The total is your basis — the amount you use to figure your tax when you sell the stock you bought.
When is an employee granted a non-statutory stock option?
It is important to recognize that there are different rules with regard to tax consequences when an employee is granted a non-statutory stock option and when the employee purchases the shares underlying the option through his exercise of that option. These are set out below.
What is code V for exercise of stock options?
My client exercised his option to buy company stock and then sold the stock the same day. His W-2 shows Code V in box 12 for $10,712.64. I have no problem with the W-2.
What do you call income from nonqualified stock options?
Nonqualified stock options (NQSOs) are also known as nonstatutory stock options. You report NQSO income differently than you report income from these: Options granted under an employee stock purchase plan
