Oftentimes, the cost basis of an NQSO sale reported on a 1099-B doesn't include the stock's discount (also called the compensation). If the compensation was reported on your W-2 in box 12, you could be paying more taxes than you need to.
Here's how to make sure the cost basis is right when reporting the sale from your 1099-B:
- Open your tax return and go to Federal, then Wages & Income.
- Go to Investments and Savings, and then select Start or Revisit next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
- Enter your 1099-B if you haven't already. If you have, select Edit under your 1099-B.
- On the Tell us about the sales on your 1099‑B screen, select Yes when asked Do these sales include any employee stock? Answer the rest of the questions and select Continue.
- Continue through the screens, and on the Now, enter one sale on your 1099‑B screen, fill out the fields and select The cost basis is incorrect or missing on my 1099‑B and Continue.
- On the We noticed there's an issue with your cost basis...Let us know if you'd like to make any changes screen, select I know my cost basis and need to make an adjustment and enter the correct cost basis from your W-2 (box 12, code V).
- If you have more than one sale on your 1099-B, you may want to reference the supplemental statement provided by your broker that shows the Box 12, Code V amount by individual sale, rather than the one amount on your W-2.
- Select Continue and the transaction will now reflect the corrected cost basis.
A same-day (cashless) NQSO transaction will usually net out to a small loss, representing the commission and fees associated with the transaction.