I exercised ISO shares and held. My W-2 shows these as regular income. Do I add these again under income as an "ISO Exercise and Hold"?

[mashcraf]

My W-2 shows in Box 12 V the Fair Market Value minus the Exercise Price for these ISO shares.  In addition the expected percentage of this amount was withheld for taxes.

Is this a problem where my employer made a mistake on the W-2? 

Is Turbo Tax calculating this wrong by adding AMT in this case?  

In either case it appears that I am paying taxes on twice the potential profit while actual profit is $0.

Example:

ISO grant from 2012 for 10 shares at $5

Exercise with cash in 2018 with FMV of $25 

Actual Income is $0

W-2 shows $200 in regular income.  ($25-$5)*10

Turbo Tax includes the $200 when calculating regular tax AND includes the $200 for AMT calculations for ISO exercise and hold.

Thanks!

[TomYoung · Accepted solution]

"My W-2 shows in Box 12 V the Fair Market Value minus the Exercise Price for these ISO shares."

No, it doesn't.  What Box 12 with a code V indicates is that you exercised a NonQualified Stock Option, (NQSO), not an Incentive Stock Option (ISO).  Both the fact that that code is in that Box plus the fact that you state that you didn't sell any of the stock acquired makes it very clear that your option was a NQSO.  With an ISO compensation is created when you SELL the stock in a disqualifying sale, but you didn't sell.

So you have no need to walk through the "ISO Exercise & Hold" interview because it doesn't pertain to you.

Tom Young

[mashcraf]

Tom, Your answer makes total sense.  These were originally ISO but after a merger were converted to NQSO and I had not realized that.