maglib
Level 10

Get your taxes done using TurboTax

@zaka634  If you receive an option to buy stock as payment for your services, you may have income when you receive the option, when you exercise the option, or when you dispose of the option or stock received when you exercise the option. 

 

Under the Investment Income section of turbotax there is a section ISO excercise and hold where you will enter the details to your information.

There is also  youtube video on how to enter them in tt https://www.youtube.com/watch?v=66Gzu9vZqb4&t=13s

 

The IRS has issued two forms (and instructions): Form 3921 is used to report ISO exercises, and Form
3922 is used for ESPP share purchases. A separate form must be provided and filed for each exercise or
purchase during the calendar year. Are there penalties for noncompliance?
The Internal Revenue Code imposes a penalty of between US$50 and US$270 for each statement that is
not timely and/or correctly filed (with the penalty increasing within that range depending on the degree of
delay beyond the deadline), up to an aggregate annual limit of US$3,339,000. If an employer intentionally
fails to provide a required statement or the correct information on the statement, the penalty is a minimum
of US$550 per statement, with no maximum penalty. These penalties will apply separately for the
information statement to be provided to the employee or former employee and the return to be filed with
the IRS. If a corporation fails to provide both, the penalties and cap are doubled. Smaller penalties apply
to “small businesses” (generally those that have average annual gross receipts of US$5 million or less for
the three most recent tax years (or for the period in existence, if shorter) ending before the calendar year
in which the information returns were due).

Statutory Stock Options

If your employer grants you a statutory stock option, you generally don't include any amount in your gross income when you receive or exercise the option. However, you may be subject to alternative minimum tax in the year you exercise an ISO. For more information, refer to the Instructions for Form 6251. You have taxable income or deductible loss when you sell the stock you bought by exercising the option. You generally treat this amount as a capital gain or loss. However, if you don't meet special holding period requirements, you'll have to treat income from the sale as ordinary income. Add these amounts, which are treated as wages, to the basis of the stock in determining the gain or loss on the stock's disposition. Refer to Publication 525 for specific details on the type of stock option, as well as rules for when income is reported and how income is reported for income tax purposes.

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.

Employee Stock Purchase Plan - After your first transfer or sale of stock acquired by exercising an option granted under an employee stock purchase plan, you should receive from your employer a Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan under Section 423(c). This form will report important dates and values needed to determine the correct amount of capital and ordinary income to be reported on your return.

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