Determining your 2017 stock plan tax requirements a step-by-step guide

Transcription

1 Determining your 2017 stock plan tax requirements a step-by-step guide Alert: The tax-reform legislation adopted in December 2017 does not affect the 2017 tax year or the federal tax return for 2017 that you file in INSIDE How to use the Supplemental Form to avoid overpaying taxes When your restricted stock, restricted stock units, performance shares, or performance units vest, you may have taxable ordinary income to report when you file your tax return, in addition to any capital gains or losses upon sale of that stock. To determine your tax-reporting requirements, follow the steps outlined in this document. 1

2 MASKED NAME Account Account No. XXX-XXXXXX No. X Customer Service: XXX-XXX-XXXX Recipient Recipient ID No. XXX-XX-XXXX ID No. ***-**-1500Payer s Payer's Fed Fed ID ID Number: XX-XXXXXXX FORM 1099-B* Copy B for Recipient OMB No. XXXX-XXXX 2017 Proceeds from Broker and Barter Exchange Transactions Short-term transactions for which basis is not reported to the IRS --report on Form 899 with Box B checked and/or Schedule D, Part I Proceeds are reported as gross proceeds unless otherwise indicated (a).(this Label is a Substitute for Boxes 2, 3, 5 & 6) (IRS Form 1099-B box numbers are shown below in bold type) 1a Description of property, Stock or Other Symbol, CUSIP Action Quantity 1b Date 1c Date Sold 1d Proceeds 1e Cost or 1f Accrued 1g Wash Sale Gain/Loss (-) Federal 1 State Acquired or Disposed Other Basis (b) Market Loss Income Tax 16 State Tax Discount Disallowed Withheld Withheld Theta Corp. TTT Sale /17/17 05/10/17 19, (e) 19,61.75 Sale /19/17 05/10/17 5, (e) 5, Subtotals 2, MASKED NAME Account Account No. XXX-XXXXXX No. X Customer Service: XXX-XXX-XXXX Recipient Recipient ID No. XXX-XX-XXXX ID No. ***-**-1500Payer s Payer's Fed Fed ID ID Number: XX-XXXXXXX TOTALS 2, Note: This information is not reported to the IRS. It may assist you in tax return preparation. Box B Short-Term Realized Gain 2, Box B Short-Term Realized Loss Detail Information Based on the disposal method you have selected, the lots that appear on your 1099 Supplemental may differ from the lots on the 1099-B. Short-Term Transactions Description of Property, Stock or Other Symbol, Cusip Grant Quantity Date of Date Sold Proceeds Ordinary Income Adjusted Cost or Wash Sale Loss Adjusted Gain/Loss Type (w) Acquisition (x) or Disposed Reported (y) Other Basis (z) Disallowed Theta Corp. TTT RSU /17/17 05/10/17 19, , , RSA /19/17 05/10/17 5, , , Totals 2, , Short-Term Adjusted Realized Gain Short-Term Adjusted Realized Loss 0.00 Wash Sale Loss Disallowed Detail Information Based on the disposal method you have selected, the lots that appear on your 1099 Supplemental may differ from t Long-Term Transactions ription of Property, Stock or Other Symbol, Cusip Quantity Date of D Department of the Treasury Internal Revenue Service Name(s) shown on return OMB No File with your Schedule D to list your transactions for lines 1b, 2, 3, 8b, 9, and 10 of Schedule D. Sequence No. 12A Social security number or taxpayer identification number Before you check Box A, B, or C below, see whether you received any Form(s) 1099-B or substitute statement(s) from your broker. A substitute statement will have the same information as Form 1099-B. Either will show whether your basis (usually your cost) was reported to the IRS by your broker and may even tell you which box to check. Part I Short-Term. Transactions involving capital assets you held 1 year or less are short term. For long-term transactions, see page 2. Note: You may aggregate all short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS and for which no adjustments or codes are required. Enter the totals directly on Schedule D, line 1a; you aren't required to report these transactions on Form 899 (see instructions). You must check Box A, B, or C below. Check only one box. If more than one box applies for your short-term transactions, complete a separate Form 899, page 1, for each applicable box. If you have more short-term transactions than will fit on this page for one or more of the boxes, complete as many forms with the same box checked as you need. (A) Short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS (see Note above) (B) Short-term transactions reported on Form(s) 1099-B showing basis wasn't reported to the IRS (C) Short-term transactions not reported to you on Form 1099-B Adjustment, if any, to gain or loss. 1 (e) If you enter an amount in column (g), (h) (c) (d) Cost or other basis. enter a code in column (f). Gain or (loss). (a) (b) Date sold or Proceeds See the Note below See the separate instructions. Subtract column (e) Description of property Date acquired disposed of (sales price) and see Column (e) from column (d) and (Example: 100 sh. XYZ Co.) (Mo., day, yr.) (Mo., day, yr.) (see instructions) in the separate (f) (g) combine the result instructions Code(s) from Amount of with column (g) instructions adjustment 2 Totals. Add the amounts in columns (d), (e), (g), and (h) (subtract negative amounts). Enter each total here and include on your Schedule D, line 1b (if Box A above is checked), line 2 (if Box B above is checked), or line 3 (if Box C above is checked) Note: If you checked Box A above but the basis reported to the IRS was incorrec adjustment in column (g) to correct the basis. See Column (g) in the separa ork Reduction Act Notice, see your tax retur SCHEDULE D OMB No (Form 100) Capital Gains and Losses Attach to Form 100 or Form 100NR. Department of the Treasury Go to for instructions and the latest information. Internal Revenue Service (99) Use Form 899 to list your transactions for lines 1b, 2, 3, 8b, 9, and 10. Sequence No. 12 Name(s) shown on return Your social security number Part I Short-Term Capital Gains and Losses Assets Held One Year or Less See instructions for how to figure the amounts to enter on the (g) (h) Gain or (loss) lines below. (d) (e) Adjustments Subtract column (e) Proceeds Cost to gain or loss from from column (d) and This form may be easier to complete if you round off cents to (sales price) (or other basis) Form(s) 899, Part I, combine the result with whole dollars. line 2, column (g) column (g) 1a Totals for all short-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 899, leave this line blank and go to line 1b. 1b Totals for all transactions reported on Form(s) 899 with Box A checked Totals for all transactions reported on Form(s) 899 with Box B checked Totals for all transactions reported on Form(s) 899 with Box C checked Short-term gain from Form 6252 and short-term gain or (loss) from Forms 68, 6781, and Net short-term gain or (loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover Worksheet in the instructions ( ) 7 Net short-term capital gain or (loss). Combine lines 1a through 6 in column (h). If you have any longterm capital gains or losses, go to Part II below. Otherwise, go to Part III on the back Part II Long-Term Capital Gains and Losses Assets Held More Than One Year See instructions for how to figure the amounts to enter on the (g) (h) Gain or (loss) lines below. (d) (e) Adjustments Subtract column (e) Proceeds Cost to gain or loss from from column (d) and This form may be easier to complete if you round off cents to (sales price) (or other basis) Form(s) 899, Part II, combine the result with whole dollars. line 2, column (g) 8a Totals for all long-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 899, leave this line blank and go to line 8b. 8b Totals for all transactions reported on Form(s) 899 with Box D checked Totals for all transactions reported on Form(s) 899 with Box E checked Totals for all transactions reported on Form(s) 899 with Box F checked Gain from Form 797, Part I; long-term gain from Forms 239 and 6252; and long-term gain or (loss) from Forms 68, 6781, and Net long-term gain or (loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K Capital gain distributions. See the instructions Long-term capital loss carryover. Enter the amount, if any, from line 13 of your Capital Loss Car Worksheet in the instructions Net long-term capital gain or (loss). Combine lines 8a through 1 in colum the back For Paperwork Reduction Act Notice, see your tax return instruction column (g) Department of the Treasury Internal Revenue Service (99) U.S. Individual Income Tax Return 2016 OMB No IRS Use Only Do not write or staple in this space. For the year Jan. 1 Dec. 31, 2016, or other tax year beginning, 2016, ending, 20 See separate instructions. Your first name and initial Last name Your social security number If a joint return, spouse s first name and initial Last name Spouse s social security number Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Make sure the SSN(s) above and on line 6c are correct. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking Foreign country name Foreign province/state/county Foreign postal code a box below will not change your tax or refund. You Spouse 1 Single Head of household (with qualifying person). (See instructions.) If Filing Status 2 Married filing jointly (even if only one had income) the qualifying person is a child but not your dependent, enter this Check only one 3 Married filing separately. Enter spouse s SSN above child s name here. box. and full name here. 5 Qualifying widow(er) with dependent child 6a Yourself. If someone can claim you as a dependent, do not check box 6a..... Boxes checked Exemptions on 6a and 6b No. of children c Dependents: (2) Dependent s (3) Dependent s () if child under age 17 on 6c who: (1) First name Last name social security number relationship to you qualifying for child tax credit lived with you (see instructions) did not live with you due to divorce or separation If more than four (see instructions) dependents, see Dependents on 6c instructions and not entered above check here Add numbers on d Total number of exemptions claimed lines above 7 Wages, salaries, tips, etc. Attach Form(s) W Income 8a Taxable interest. Attach Schedule B if required a b Tax-exempt interest. Do not include on line 8a... 8b Attach Form(s) 9 a Ordinary dividends. Attach Schedule B if required a W-2 here. Also attach Forms b Qualified dividends b W-2G and 10 Taxable refunds, credits, or offsets of state and local income taxes R if tax 11 Alimony received was withheld. 12 Business income or (loss). Attach Schedule C or C-EZ Capital gain or (loss). Attach Schedule D if required. If not required, check here 13 If you did not 1 Other gains or (losses). Attach Form get a W-2, see instructions. 15 a IRA distributions. 15a b Taxable amount... 15b 16 a Pensions and annuities 16a b Taxable amount... 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E Farm income or (loss). Attach Schedule F Unemployment compensation a Social security benefits 20a b Taxable amount... 20b 21 Other income. List type and amount Combine the amounts in the far right column for lines 7 through 21. This is your total income Educator expenses Certain business expenses of reservists, performing artists, and Form Adjusted Gross Income fee-basis government officials. Attach Form 2106 or 2106-EZ 2 25 Health savings account deduction. Attach Form Moving expenses. Attach Form Deductible part of self-employment tax. Attach Schedule SE Self-employed SEP, SIMPLE, and qualified plans Self-employed health insurance deduction Penalty on early withdrawal of savings a Alimony paid b Recipient s SSN 31a 32 IRA deduction Student loan interest deduction Tuition and fees. Attach Form Domestic production activities deduction. Attach Form Add lines 23 through Subtract line 36 from line 22. This is your adjusted gross income For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No B Form 100 (2016) 1 Gather the following documents. FORM/DATA WHERE TO FIND IT WHO TO CALL Form W-2 (or 1099-MISC if you are a nonemployee) This form will be provided by your company. Your company s payroll department IRS Form 100 (the full 100, not the 100EZ or the 100A), including Schedule D Capital Gains and Losses Forms are available online at by calling 800.TAX.FORM ( ), or by visiting your local IRS office. Your local IRS office or your tax advisor IRS Form 899 This form is available online at by calling 800.TAX.FORM ( ), or by visiting your local IRS office. Your local IRS office or your tax advisor Form 1099-B You can access the form online at Fidelity.com/taxforms at the end of January. In addition, a form will be mailed to you no later than mid-february, if applicable. A Fidelity Stock Plan Services Representative at the number provided on the statement 2017 Supplemental Information (Fidelity is providing you with additional information to supplement your 1099-B due to cost basis regulations that no longer permit brokers to include ordinary income.) You can access the form online at Fidelity.com/taxforms at the end of January. In addition, a form will be mailed to you no later than mid-february, if applicable. A Fidelity Stock Plan Services Representative at the number provided on the statement Participant uses these Fidelity forms Form 1099-B Form 899 Schedule D Form TAX REPORTING STATEMENT Form 899 Sales and Other Dispositions of Capital Assets Go to for instructions and the latest information Attachment 2017 Attachment Supplemental Stock Plan Lot Detail Supplemental Stock Plan Lot Detail 2017 SUPPLEMENTAL INFORMATION Form 1099-Supplemental to complete Rolls up into Rolls up into b Spouse } * Fidelity is not involved in the preparation of the content supplied at the third-party unaffiliated website and does not guarantee or assume any responsibility for its content. 2

3 2 Report your ordinary income. Your equity compensation awards are considered ordinary income to you and taxable in the year your grant vests and/or shares are delivered to you (assuming there is no deferral feature). Your compensation is the fair market value (FMV) of the stock at vesting, less the amount (if any) you paid for the shares, multiplied by the number of shares vested. If you are a salaried worker, your employer should have already included the value of your award in your W-2. If you are a nonemployee, you should have received a 1099-MISC. In addition to ordinary income, you may owe tax on any capital gains resulting from the sale of your stock, which is explained in later steps. Example: IRS W-2 and Form 100 b Employer identification number (EIN) a Employee s social security number OMB No Safe, accurate, FAST! Use Visit the IRS website at * 1 Wages, tips, other compensation 2 Federal income tax withheld c Employer s name, address, and ZIP code 3 Social security wages Social security tax withheld 5 Medicare wages and tips 6 Medicare tax withheld 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee s first name and initial Last name Suff. 11 Nonqualified plans 12a See instructions for box 12 C 13 Statutory employee 1 Other f Employee s address and ZIP code 15 State Employer s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name Retirement plan Third-party sick pay o d e 12b C o d e 12c C o d e 12d C o d e Your employer might use box 1 to also show the income from stock compensation (included in box 1). Statement Wage and Tax Form W-2 Copy B To Be Filed With Employee s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service. Department of the Treasury Internal Revenue Service The value of the award is included in boxes 1 and 5 and also in box 3 up to the maximum wage base. The value of the award is included in boxes 16 and 18, if state and local tax applies. Tax on the value is included in boxes 17 and 19, if applicable. Federal taxes withheld on the award value are included in boxes 2 and 6 and in box up to the maximum wage base. W-2 income is reported on line 7 of Form 100. (Income from 1099-MISC is reported on Schedule C.) * Fidelity is not involved in the preparation of the content supplied at the third-party unaffiliated website and does not guarantee or assume any responsibility for its content. 3

4 3 Assemble information on the sale of your stock. You will need to refer to two documents this year. Your Fidelity Brokerage 1099-B Tax-Reporting Statement and your 2017 Supplemental Information Form. The Supplemental Form may contain information that is not reported on your 1099-B due to cost basis regulations. If the amounts on these two forms differ, you ll need to use information from both to complete your tax forms to ensure that you don t overpay taxes. Example: Fidelity Brokerage 1099-B Tax-Reporting Statement FORM 1099-B* Proceeds from Broker and Barter Exchange Transactions Short-term transactions for which basis is not reported to the IRS --report on Form 899 with Box B checked and/or Schedule D, Part I Proceeds are reported as gross proceeds unless otherwise indicated (a).(this Label is a Substitute for Boxes 2, 3, 5 & 6) 1a Description of property, Stock or Other Symbol, CUSIP Action Quantity 1b Date Acquired 1c Date Sold or Disposed (IRS Form 1099-B box numbers are shown below in bold type) 1d Proceeds 1e Cost or Other Basis (b) 1f Accrued Market Discount 1g Wash Sale Loss Disallowed Gain/Loss (-) Copy B for Recipient OMB No. XXXX-XXXX Federal Income Tax Withheld 1 State 16 State Tax Withheld Theta Corp. TTT Sale /17/17 05/10/17 19, (e) 19,61.75 Sale /19/17 05/10/17 5, (e) 5, Subtotals 2, TOTALS 2, Box B Short-Term Realized Gain Box B Short-Term Realized Loss 2, * This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported. 1 CUSIP (your company s ticker/ trading symbol) 2 Quantity (number of shares sold) 3 Date Acquired (also known as the date of vesting or distribution) Date Sold or Disposed 5 Proceeds (gross proceeds from stock sale) 6 Cost or Other Basis (this is provided to the IRS, as directed, and may need to be adjusted see the Supplemental Form). The IRS does not allow brokers to report the basis for this type of stock compensation. (See the FAQs at the end of this guide for details.) 7 Gain/Loss (from the proceeds of the sale and may also need to be adjusted see the Supplemental Form) Continues

5 3 Assemble information on the sale of your stock. Example: 2017 Supplemental Information Form Detail Information Supplemental Stock Plan Lot Detail Based on the disposal method you have selected, the lots that appear on your 1099 Supplemental may differ from the lots on the 1099-B. Short-Term Transactions Description of Property, Stock or Other Symbol, Cusip Grant Type (w) Quantity Date of Acquisition (x) Date Sold or Disposed 2017 SUPPLEMENTAL INFORMATION MASKED NAME Account Account No. XXX-XXXXXX No. X Customer Service: XXX-XXX-XXXX Recipient Recipient ID No. XXX-XX-XXXX ID No. ***-**-1500Payer s Payer's Fed Fed ID ID Number: XX-XXXXXXX Note: This information is not reported to the IRS. It may assist you in tax return preparation. Proceeds 8 Ordinary Income Reported (y) Adjusted Cost or Other Basis (z) Wash Sale Loss Disallowed Adjusted Gain/Loss Theta Corp. TTT RSU /17/17 05/10/17 19, , , RSA /19/17 05/10/17 5, , , Totals 2, , Short-Term Adjusted Realized Gain Short-Term Adjusted Realized Loss Wash Sale Loss Disallowed Ordinary Income Reported (cross-reference this with your company W-2 and input in column (g) of Form 899) 9 10 Adjusted Cost Basis (this amount is used to recalculate your gain/loss and is equal to the ordinary income plus the cost basis on your 1099-B) Adjusted Gain/Loss (recalculated per your new basis; proceeds minus your adjusted cost basis this amount goes on column (h) of Form 899) 5

6 Use the information from IRS Form 1099-B and Fidelity s Supplemental Information form to complete IRS Form 899. Example: Restricted Stock and Performance Awards: Hold at vesting and sell before one year (short term) To complete Form 899 and Schedule D, you need to know: Which shares you sold from which grant When you acquired those shares (i.e., the vesting/distribution date) The value of the stock at vesting/distribution The date of sale The sale price and whether it is net of commission Your cost basis (from the Supplemental Form) 6 Continues

7 Use the information from IRS Form 1099-B and Fidelity s Supplemental Information form to complete IRS Form 899. Example: Restricted Stock and Performance Awards: Hold at vesting and sell after one year (long term) To complete Form 899 and Schedule D, you need to know: Which shares you sold from which grant When you acquired those shares (i.e., the vesting/distribution date) The value of the stock at vesting/distribution The date of sale The sale price and whether it is net of commission Your cost basis (from the Supplemental Form) 7

8 5 Use IRS Form 899 to calculate your capital gains and/or losses on Schedule D. Gain or loss from the sale of the stock should be reflected on Form 899 and Schedule D. How this is reflected depends on whether the sale is short term (less than one year from the date the stock was acquired to the date it was sold) or long term (more than one year from the date acquired to the date of sale). Example: Short-Term Gains or Losses Example: Long-Term Gains or Losses 8

9 Frequently Asked Questions Q: Does the tax-reform legislation adopted in December 2017 affect my 2017 taxes? A: No. The tax-reform legislation adopted in December 2017 does not affect the 2017 tax year or the federal tax return for 2017 that you file in Q: Why does my cost basis show up as zero? A: Most restricted stock and performance share awards provided by a company do not require you to pay a price for it. Rather, they provide the award to you without cost. As a result, your cost basis is zero and reflected as such in your 1099-B because IRS rules do not let us adjust it. However, your employer will include the Fair Market Value (less any amount you paid, if any) of the award as compensation income on your W-2. Therefore, your Supplemental Information Form issued by Fidelity shows the adjusted cost basis and adjusted gain/loss needed for you to properly file your taxes so you don t overpay tax. Q: How do I determine if the capital gain or loss on the sale of my restricted stock, restricted stock units, performance shares, or performance units should be treated as long term or short term? A: When you subsequently sell the shares received upon vesting/distribution, the difference between your sale price and your cost basis in the stock will be treated as a capital gain (or loss). If your holding period of the stock is longer than one year from the vesting/distribution date, your gain (or loss) will be treated as long term. If your holding period is less than one year, your gain (or loss) will be treated as short term and taxed as ordinary income. The sale proceeds are shown on Form 1099-B. If you received restricted stock and made a Section 83(b) election, you will need to consult your tax advisor. Q: Which form do I use to report my capital gain or loss? A: You need to complete two forms: Form 899, with its column totals going onto Schedule D (Form 100) for the year in which you sold your stock. These forms are filed with your Form 100 federal income tax return. This is required even when you are only selling shares to pay the taxes at vesting/ distribution (or if you have no gain at sale beyond what already appears on your W-2). Note: When you report the sale of the shares you acquired when your grant vested or was paid out on Form 899 and Schedule D, you avoid double taxation by including its value at vesting/payout in the cost basis column. Any income you realized at vesting (or payout after a tax deferral) is treated as compensation income, was already reported to the IRS on Form W-2 (or on Form 1099-MISC if you are a nonemployee, such as a director), and was included in your income for the year of vesting/distribution. 9 Continues

10 Frequently Asked Questions Q: What about when my grant vests/distributes over time? A: When you have an award that vests/distributes in stages or portions (e.g., 25% a year or 25% for meeting certain targeted performance goals), each portion has its own tax basis that depends on its value at vesting/payout. Your tax basis is equal to the amount (if any) you paid for the shares plus the amount that was treated as compensation for each portion. Your capital gain or loss is the difference between the net sale price and your tax basis for each portion. Q: Will I owe other taxes beyond federal tax when I sell my stock? A: State and local taxes may also apply, and the rules governing such taxes may vary from federal income tax rules. Please consult your tax advisor for more information. Q: How are dividend equivalents taxed? A: When dividend equivalents are paid at vesting through additional shares or cash, these are reported as part of your ordinary W-2 compensation income and withholding applies at that time. With nonemployees, such as directors and independent contractors, this income goes on Form 1099-MISC. The full value of the shares when received is their tax basis when you sell them. Should the cashdividend payout occur earlier when shareholders receive dividends, this compensation income will be taxed and withholding applies at that time. Go back to the Fidelity SPS Resource Center If you have any questions, a Fidelity Stock Plan Services Representative can help. Call Tax laws are complex and subject to change. State and local taxes may also apply, and the rules governing such taxes may vary from federal income tax rules. Your actual income tax consequences depend on your individual circumstances. Therefore, you should always consult a qualified tax advisor regarding your particular tax situation. Fidelity Brokerage Services LLC, Member NYSE, SIPC Fidelity Stock Plan Services, LLC 2018 FMR LLC. All rights reserved /3129 RS-TAX-PDF-0118