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 you exercise or sell shares acquired from a stock option plan (SOP), you may have taxable ordinary compensation income to report when you file your tax return, in addition to any capital gains or losses. If you are unsure if your plan is nonqualified, you can easily determine this by looking up your grant type on NetBenefits, under your Plan Summary page. 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. ***-**-9869Payer 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 reported to the IRS --report on Form 899 with Box A 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 /1/17 06/1/17 73, ,028.50(e) 6, TOTALS 73, , Box A Short-Term Realized Gain MASKED 6, NAME Account Account No. XXX-XXXXXX No. X Customer Service: XXX-XXX-XXXX Box A Short-Term Realized Loss 0.00 Recipient Recipient ID No. XXX-XX-XXXX ID No. ***-**-9869Payer 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. For any transaction listed on Form 1099-B in a section indicating that "basis is reported to the IRS", we are reporting to the IRS: 1a Description of Property, 2 type of gain or long-term), 3 basis reported to IRS, 6 Gross or Net Proceeds, and columns 1b, 1c, 1d, 1e, 1f, 1g,, 7, 1, 15 and 16. We are not reporting to the IRS: the Act totals. 0 For any section 1256 option contracts we are reporting to the IRS: Detail 1a Description Information of Property and totals for boxes 8, 9, 10 and 11 For any transaction listed on Form 1099-B in a section indicating Based that "basis on the is disposal not reported method to the you IRS", have we selected, are the lots that appear on your 1099 Supplemental may differ from the lots on the 1099-B. Proceeds, and columns 1c, 1d,, 1, 15 and 16. We are not reporting Short-Term to the IRS: Transactions 2 type of gain or loss (i.e subtotals and totals. Description of Property, Stock or Other Symbol, Cusip kes every effort to provide accurate information, please bea 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 NQSOP /1/17 06/1/17 73, , , Totals 73, , Short-Term Adjusted Realized Gain 0.00 Short-Term Adjusted Realized Loss Wash Sale Loss Disallowed 1.78 (w) Grant Type describes the equity award source of the lot you sold this tax year. Please see the Grant Type table for additional description. xxxxxx Grant Type Equity Award Type Acquisition date represents: DO Deposit Only Shares Deposit Date NQSOP Non Qualified Stock Option Shares Exercise Date NQSP Non Qualified ESPP Shares Purchase Date Non-Incentive SAR (NSR) Exercise Date 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 Adjusted 2 Certain business expenses of reservists, performing artists, and Gross fee-basis government officials. Attach Form 2106 or 2106-EZ 2 Income 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 ins Form Your Stock Option Plan (for nonqualified plans) 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 2017 SUPPLEMENTAL INFORMATION to complete Rolls up into Rolls up into b Spouse } Form 1099-Supplemental * 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. The income earned from the exercise of nonqualified stock options is taxable as ordinary income and reported on your W-2 or 1099-MISC (if you are a nonemployee of the company) along with any tax withholding that may have occurred. The difference between the fair market value (FMV) at exercise* minus the grant price (strike price) per share also known as the spread is treated as taxable compensation. In addition, 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 for nonqualified SOP 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. 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 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. 11 Nonqualified plans 12a See instructions for box 12 C 13 Statutory employee 1 Other Retirement plan Third-party sick pay o d e 12b C o d e 12c C o d e 12d C o d e V Department of the Treasury Internal Revenue Service The spread from your stock option exercise is coded here as a V. Please note: This income is already part of the income reported in the related other boxes and is not separately reported on your tax return. The amount of the spread is included in boxes 1 and 5 and also in box 3 up to the maximum wage base. Stock option spread is included in boxes 16 and 18. Boxes 17 and 19 show the state and local income taxes withheld on the exercise. Federal taxes withheld 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.) *The exact date is defined by your company s specific plan. 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 purchase and 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 in 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 reported to the IRS --report on Form 899 with Box A 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 /1/17 06/1/17 73, ,028.50(e) 6, TOTALS 73, , Box A Short-Term Realized Gain 6, Box A Short-Term Realized Loss 0.00 For any transaction listed on Form 1099-B in a section indicating that "basis is reported to the IRS", we are reporting to the IRS: 1a Description of Property, 2 type of gain or loss (i.e. short-term or long-term), 3 basis reported to IRS, 6 Gross or Net Proceeds, and columns 1b, 1c, 1d, 1e, 1f, 1g,, 7, 1, 15 and 16. We are not reporting to the IRS: the Action, the Gain/Loss, and all subtotals and totals. For * This any is section important 1256 tax option information contracts and we are is being reporting furnished to the IRS: to the 1a Internal Description Revenue of Property Service. and If totals you are for boxes required 8, 9, to 10 file and a return, 11. 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. For any transaction listed on Form 1099-B in a section indicating that "basis is not reported to the IRS", we are reporting to the IRS: 1a Description of Property, 5 Noncovered security, 6 Gross or Net Proceeds, and columns 1c, 1d,, 1, 15 and 16. We are not reporting to the IRS: 2 type of gain or loss (i.e. short-term or long-term), the Action, the Gain/Loss, columns 1b, 1e, 1f, 1g, 2, 3 and 7 and all subtotals and totals. 1 CUSIP (your company s ticker/ trading symbol) 2 Quantity (number of shares sold) 3 Date Acquired (date you exercised the grant) 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) 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 purchase and sale of your stock. Example: 2017 Supplemental Information Form Detail Information 2017 SUPPLEMENTAL INFORMATION MASKED NAME 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 Account Account No. XXX-XXXXXX No. X Customer Service: XXX-XXX-XXXX Recipient Recipient ID No. XXX-XX-XXXX ID No. ***-**-9869Payer 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 Ordinary Income Reported (y) Adjusted Cost or Other Basis (z) Wash Sale Loss Disallowed Adjusted Gain/Loss Theta Corp. TTT NQSOP /1/17 06/1/17 73, , , Totals 73, , Short-Term Adjusted Realized Gain 0.00 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: Exercise and Hold with sale less than 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 exercise date) The fair market value of the stock at exercise The date of sale The sale price and whether it is net of commission Your cost basis Amount of ordinary income (from the Supplemental Form) 6

7 Use the information from IRS Form 1099-B and Fidelity s Supplemental Information form to complete IRS Form 899. Example: Exercise and Hold with sale 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 exercise date) The fair market value of the stock at exercise The date of sale The sale price and whether it is net of commission Your cost basis Amount of ordinary income (from the Supplemental Form) 7 Continues

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). For a stock option, the holding period begins on the day after the exercise date. 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: I already paid taxes on my exercise. Why did you send me a tax form related to my exercise and do I need to include it on my return? A: The income at exercise is also part of your cost basis in reporting your capital gain/loss on Form 899. All information on your Fidelity tax form will need to be included on your tax return. Any taxes that were withheld at the time of exercise will be included on your W-2 or 1099-MISC from your employer. The amount withheld is usually based on a minimum required withholding percentage set by tax laws and is just an estimate of your liability on this transaction. When you complete your tax return, you reconcile with the IRS your actual tax liability. This means you can possibly owe more taxes or you may get a refund. Q: Why do my tax forms show a capital loss from my exercise? A: Generally speaking, a loss on a 1099-B and 899 is usually a result of any market-related loss on the stock sale, and/or any commissions and fees charged. Q: What is a wash sale? A: A wash sale occurs when you sell shares at a loss and buy additional shares of the same security within a 61-day period, beginning 30 days before the sale and ending 30 days after the sale, including the date of the sale. If the sale results in a wash sale, generally, you will not be able to deduct the resulting loss. Instead, the loss and the holding period will be carried over to increase the basis of the new shares. For assistance with completing your tax return, please consult your tax advisor. Q: How is the tax withholding determined on an exercise? A: The taxes that are withheld from an exercise are determined by your employer and based on the rules for supplemental wage income. The spread on the exercise is considered ordinary compensation income, and tax withholding is generally required at the time of exercise. Therefore, it is the responsibility of your employer to manage the tax percentage due and amounts withheld from your transaction. 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. 9

10 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 SOP-NQ-TAX-PDF-0118