![]() However, a non-match of W-2 Box 1 and Form 1040 Line 1 can raise red flag with IRS computers. Instead, they believed taxpayers needed to add the unreported W-2 income to wages reported on Line 1 of Form 1040. Enter on line 8j any income from the exercise of stock options not otherwise reported on your Form 1040 or 1040-SR, line 1.īefore this development, some tax experts thought this “Other Income” category was not for compensation-related income (only for non-wage income). In the instructions for Form 1040 (pages 86–87), the IRS directs that the section “Other Income” on Schedule 1 is where to put any employee stock option income that is not on your Form W-2 and is therefore not reported on Line 1 of Form 1040: An error by your employer does not release you from that obligation. The total for other income from Schedule 1 goes into Line 8 of Form 1040.Īlert: The IRS expects you to report and pay tax on income mistakenly left off your Form W-2. Previously, taxpayers listed the type of other income and the amount, or put the details in a supplemental attachment. The list of items “a” through “p” (plus “z”) under “Other Income” on Schedule 1 is new for the 2021 tax year. If your company does not report your employee stock compensation on Form W-2 and does not later send you a corrected W-2c, the revised Schedule 1 for the 2021 tax year indicates that the amount goes in the “Other Income” section on Line 8j (“Stock Options”). ![]() The totals from Part I of Schedule 3 go into Line 20 of Form 1040.Ĥ. The amount from Line 25 of Form 8801 goes into Schedule 3 (“Non-Refundable Credits”) on Line 6b, “Credit for prior year minimum tax.” This is the first tax year the AMT credit has its own line on the schedule. The AMT credit that is generated for an ISO exercise that triggers the AMT is recouped through Form 8801, as it was in the past. The totals from Part I of Schedule 2 go into Line 17 on Form 1040. You enter your Form 6251 calculation on Line 1 of Form 1040’s Schedule 2 (“Tax”). If the ISO stock that triggered the AMT was sold, the difference from the ordinary tax is reported on Line 2k. The spread at ISO exercise is reported on Line 2i if the ISO stock was not sold in the calendar year of exercise. A concern for anyone with incentive stock options (ISOs), the AMT is calculated on Form 6251. That is what you need to report on Form 8949.ģ. However, the correct cost basis is the value of the shares at vesting. To avoid the risk of overpaying taxes, you need to make an adjustment on Form 8949.įor restricted stock/RSUs, confusingly, the cost basis reported on Form 1099-B is zero or the box is left blank. what you paid for the shares) appears on the 1099-B. ![]() This creates tax-return confusion and complications, as only the exercise cost (i.e. Brokers are prohibited from including equity compensation income as part of the cost basis reported on Form 1099-B. For stock sales, there is still no change in the IRS rules on how the cost-basis information is reported on Form 1099-B and Form 8949.
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