Stock option sale - Information is not reported on W-2, did not receive any forms - how to report on Turbo Tax for 2019?

Forum|Forum|6 years ago
July 13, 2020
12 replies
87 views

Hello,

I would really appreciate it if anyone could help me figure out how to correctly report my stock option income correctly for 2019.

In 2018, I received some stock options from the small privately held company that I worked at. The agreement specifically states "This Option is NOT an incentive stock option under section 422 of the Internal Revenue Code and will be interpreted accordingly", which I think means that these are considered non-qualified stock options (but please correct me if I am wrong). The company was then acquired in 2019, and when it was acquired my stock options automatically exercised. I received a check for the amount of income I received from this sale. This is the only document I ever received - a check from my company for X amount of money.

This income did NOT appear on my W-2, and I did NOT receive any other sort of forms (no 1099s, etc.).

I can't seem to figure out how to report this income correctly since it did not appear on my W-2 and I don't have any other forms from my company to use to input it. I did find the Schedule D section where it asks for information on a 1099-B for stock option sales, but I did not receive a 1099-B so I am not sure how else to input this income.

Thanks so much to anyone able to offer any insight! Really stressing about this, because I know I'll owe a small amount of tax on this income, but I just can't figure out how to report it correctly.

Edited to add - In case it is important, I am in California.

maglib

Level 11

@Individual131415 any chance they were reported on your w-2 as income in the year received? If yes, then you will report that income from the w-2 as your cost basis. Your employer should have reported a portion of basis in one of the 2 years on your w-2 as compensation income. Which would be your basis for the stock sold. If not then it's other income.

Nonstatutory Stock Options

If your employer grants you a nonstatutory stock option, the amount of income to include and the time to include it depends on whether the fair market value of the option can be readily determined.

Readily Determined Fair Market Value - If an option is actively traded on an established market, you can readily determine the fair market value of the option. Refer to Publication 525 for other circumstances under which you can readily determine the fair market value of an option and the rules to determine when you should report income for an option with a readily determinable fair market value.

Not Readily Determined Fair Market Value - Most nonstatutory options don't have a readily determinable fair market value. For nonstatutory options without a readily determinable fair market value, there's no taxable event when the option is granted but you must include in income the fair market value of the stock received on exercise, less the amount paid, when you exercise the option. You have taxable income or deductible loss when you sell the stock you received by exercising the option. You generally treat this amount as a capital gain or loss. For specific information and reporting requirements, refer to Publication 525.

For some great info from TT on how to report see:

https://turbotax.intuit.com/tax-tips/investments-and-taxes/how-to-report-stock-options-on-your-tax-return/L3K0l47J2

I hope this was helpful.

**I don't work for TT. Just trying to help. All the best. . ***Say "Thanks" by marking as BEST ANSWER and clicking the thumb icon in a post and that I solved your question. **Mark the post that answers your question by clicking on "Mark as Best Answer" I am NOT an expert and you should confirm with a tax expert.

Individual131415Author

Level 2

Hi @maglib

Thank you for your response! They were unfortunately NOT reported anywhere on my W-2 in any year. My W-2 only shows my regular salary income, nothing about the options anywhere. I did not receive any sort of form/reporting from my employer at all. That's one reason I've been so confused about how to report this income on my return. I saw that it is almost always reported on the W-2, but I can't seem to find how to report the income myself on my taxes if it is not reported anywhere on the W-2 at all.

I do believe that it is considered a short term capital gain. Just not sure how to report that if it is not on my W-2 and I received no other documents about it besides the check itself 😕😕

maglib

Level 11

@Individual131415 If I was you I would contact my employer about why the compensation portion of the options were never taxed as ordinary income.

To get around it, just report it as other income not reported elsewhere section and classify it as related to wages for the value received. Then TT will do calculations for you. Then when you report them, just put that as cost basis, and no gain/loss recognized and they get appropriate treatment as compensation income. They probably did not have a cost basis originally in 2018. The issue is your employer did not pay their portion of taxes if it was not reported on the W-2. The positive side is you most likely will get an amended w-2 but you won't owe any taxes, interest on it.

Just in case:

Do you have a brokerage statement about these options? Did you review it?