Nonstatutory Stock Options

[jfkrestan]

I exercised some stock options (work has called them non statutory stock options) and I had taxes deducted at the time of sale.  My understanding is that my employer would report the value of the sale on my W2 with code V, which I see.  There were taxes deducted from the sale giving me the net proceeds which I received.  What I am confused is that after entering in my 1099-B form I am hit with extra taxes.  Is it possible that the taxes deducted at the time of sale were not reported?

[DavidD66]

The broker that sent you the 1099-B is required to report the price you paid for the stock when you exercised your Non-Qualified Stock Options.  However, your cost basis is not the price you paid, rather it is the cost you paid plus the amount that you were taxed on when you exercised them.  You need to enter the cost basis as reported on the Form 1099-B, and then make an adjustment to your cost basis on a subsequent screen so that your cost basis equals the value of the stock at the time you exercised your options.  That amount is the exercise price you paid, plus the "bargain element" that you were taxed on.  If you exercised and sold at the same time, your gain/loss should be zero, or very  close to it.  

[jfkrestan]

Thank you very much for your response.  If I am understanding properly, if value of the stock was $10 at time of exercising and the original cost was $5, I would need to update the cost basis to reflect $10 instead of the $5 listed on the 1099B form?

[MinhT1]

Yes, you are correct.