That depends. Were your ISOs qualified or non-qualified? If non-qualified, then when you exercised them years ago you would have been required to pay tax--at ordinary rates--on the difference between price of the option and the fair market value of the stock you purchased. If qualified, then no tax would be due upon exercise.
There's also the issue of whether your sale was a disqualifying disposition or a qualified disposition. A disqualified disposition is the following:
- When you sell the stock two years or less from the offering date, known as the "grant date," the transaction is a disqualifying disposition.
- Or if you sell the shares one year or less from the "exercise date," which is when you purchase the stock, that is also considered a disqualifying disposition.
- In both cases, the compensation should be reported on your Form W-2. However, because you are no longer with the company, you may have to include the sales proceeds as wages on Form 1040.
A qualified disposition is the following:
- more than two years passed between the grant date and the sale date, and
- more than one year passed between the exercise date and the sales date.
In a qualifying sale, the employer will not report any compensation amount for this sale; however, the taxpayer is still responsible for paying capital gains tax.
If you can provide some additional information, we can provide a more focused response. In the alternative, here is a link to a TurboTax article which addresses ISOs in a fair amount of detail. The article also contains a link to Non-Qualified Stock Options.
@Payroll7052
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