2017 Tax Return Reporting Guide for Plan Participants in US Companies

Transcription

1 2017 Tax Return Reporting Guide for Plan Participants in US Companies

2 YOUR GUIDE TO 2017 TAX FORMS The 2017 Tax Return Reporting Guide for Plan Participants in US Companies (the Guide ) summarizes the tax forms you may receive associated with your equity awards administered by Solium. The actual tax forms issued to you are based on the specific types of equity awards your company has granted to you and any related transactions that have occurred in your TAX-REFORM LEGISLATION DOES Solium Shareworks account during the 2017 tax year. NOT AFFECT 2017 TAXES OR THE 2017 TAX RETURN THAT YOU FILE IN Please note this Guide is intended for informational purposes only and focuses specifically on taxation guidance as it relates to Solium-issued year-end tax forms. It is not intended as an exhaustive explanation of the tax ramifications of equity awards or tax reporting, nor does it constitute tax advice. Tax implications and associated reporting outside of the US are not part of the scope of this Guide. If you require further information, please consult your accountant and/or professional tax advisor Annual Tax Form Guide for US Companies 2

3 TYPES OF TAX STATEMENTS ISSUED BY SOLIUM The following tax forms may be issued to you by Solium. Refer to subsequent sections of this Guide for further information about the relevance of each form for various equity types. Form 3921: Exercise of an Incentive Stock Option under Section 422(b) Form 3922: Transfer of Stock Acquired Through an Employee Stock Purchase Plan under Section 423(c) Form 1099-B: Proceeds from Broker and Barter Form 1099-DIV: Receipt of Dividends or Distributions Form 1042-S: Receipt of Dividends or Distributions for Non-U.S. Residents DELIVERY SCHEDULE FOR US TAX FORMS Form Type Target Mailing Date or Online Posting Date for Participants Form 1099-B February 15, 2018* Form 1099-DIV February 15, 2018* Form 3921 January 31, 2018 Form 3922 January 31, 2018 Form 1042-S March 15, 2018 *When issued as part of a composite Form 1099-B/Form 1099-DIV; otherwise January 31, 2018 TYPES OF TRANSACTIONS THAT GENERATE TAX FORMS 1. Why am I receiving a tax form? 2. What if I have a grant or award type not mentioned above? RECEIPT OF TAX FORMS 3. When will I receive my tax forms? 4. Can I request my tax forms in electronic versions? 5. How do I change my tax form delivery method? 6. Where will my electronic forms be posted? 7. I have not received my tax forms. What should I do? TAX REPORTING FOR STOCK OPTION PLANS 8. What is a qualified or non-qualified stock option? 9. What is the tax treatment for shares acquired from an ISO exercise? 10. What is the difference in the tax treatement between a qualifying and disqualifying disposition for shares exercised from an ISO? 11. Does my company withhold taxes when I sell shares acquired from an ISO exercise? 12. Are there any other tax ramifications associated with an ISO exercise? 13. What is Form 3921 and why will I receive one for an ISO exercise? 2017 Annual Tax Form Guide for US Companies 3

4 14. Why am I receiving a disposition survey for shares acquired from an ISO exercise? 15. What is the tax treatment for shares acquired from a NQSO exercise? 16. When I sell shares acquired from an exercise, how are my sale proceeds reported to the IRS? 17. Will I receive a Form 1099-B for a cashless (same-day-sale) exercise? 18. Will the Form 1099-B reflect my cost basis for shares exercised from stock options? TAX REPORTING FOR RESTRICTED STOCK AWARD/UNIT PLANS 19. What is the tax treatment for shares acquired from restricted stock awards/units? 20. When I sell shares acquired from a restricted stock award/unit release, how are my sale proceeds reported to the IRS? 21. Will the Form 1099-B reflect my cost basis for shares received from a restricted stock award/ unit release? TAX REPORTING FOR EMPLOYEE STOCK PURCHASE PLANS 22. What is a qualified or non-qualified ESPP? 23. What is the tax treatment for shares acquired under a qualified ESPP? 24. What is the tax treatment for shares acquired under a non-qualified ESPP? 25. When I sell shares acquired from an ESPP, how are my sale proceeds reported to the IRS? 26. Will the Form 1099-B reflect my cost basis for a sale of shares acquired from an ESPP? 27. What is Form 3922 and why will I receive one for an ESPP purchase? 28. Why am I receiving a disposition survey for shares acquired under an ESPP? 29. Are there other tax ramifications associated with qualified ESPPs? TAX REPORTING BASICS 30. What documents do I need in order to report my equity award transactions on my tax return? 31. What is ordinary income and where is it reported? 32. What is capital gain/loss and where is it reported? 33. What is cost basis? 34. Can I use the cost basis amount provided on my Form 1099-B to calculate taxable gain? 35. How do I confirm whether my company reported ordinary income on my Form W-2 and if so, how much was reported in order to adjust my cost basis? 36. What happens if the cost basis reported on my Form 1099-B needs to be adjusted to include ordinary income reported on my Form 1099-B? 37. How do I complete the Form 8949 as part of the Schedule D? 38. How do I complete the Schedule D on my tax return? 39. Do the sale proceeds on my Form 1099-B include any commissions/fees I paid for the transaction? 40. What if my Form W-2 or Form 1099-B is incorrect? 41. Why do my Solium statements look different than the types of forms provided on the IRS website? 42. Who can I contact if I have any questions about tax forms issued by Solium? 2017 Annual Tax Form Guide for US Companies 4

5 TYPES OF TRANSACTIONS THAT GENERATE TAX FORMS 1. Why am I receiving a tax form? Tax forms may be generated for the following reasons: Exercise of an Incentive Stock Option ( ISO ) Purchase of shares under an Employee Stock Purchase Plan ( ESPP ) subject to Internal Revenue Code Section 423 Sale of shares acquired from a stock option exercise, restricted stock award or unit release, employee stock purchase plan, or other type of equity grant Receipt of reportable dividend income from shares held at Solium Solium may generate the following tax forms for the equity types and transactions noted below: Transaction Type Plan Type Tax Form Acquisitions Stock Options (Incentive) Form 3921* (Exercises, Employee Stock Purchase Form 3922* Purchases) Plan (Section 423) Sales All Plan Types Form 1099-B Receipt of Dividend Income All Plan Types Form 1099-DIV Form 1042-S (non-us residents) * Form 3921 and/or Form 3922 may be generated and issued by your company or another third-party provider 2. What if I have a grant or award type not mentioned above? Most likely, your grant or award is similar to a stock option or restricted stock award/units and you will receive the correlative forms. For example, performance share units ( PSUs ) are treated like restricted stock units for tax reporting purposes. Transactions for some types of equity, such as stock appreciation rights ( SARs ), may be processed through your company directly and therefore do not result in any tax forms issued by Solium. RECEIPT OF TAX FORMS 3. When will I receive my tax forms? Refer to the Delivery Schedule For US Tax Forms earlier in this Guide for issuance dates from Solium. If you have opted to receive forms by mail, allow 7-10 business days after the date indicated for the respective statement to be delivered. For electronic delivery, statements are posted to participant accounts no later than the date indicated for the respective form and are immediately available for download; you will receive an notification once the form is ready. Note: Statements may be available earlier than the required deadlines noted, but this is not guaranteed Annual Tax Form Guide for US Companies 5

6 4. Can I request my tax forms in electronic versions? Through your Shareworks account, you may elect to receive your tax forms by mail or electronically (posted to your account once available). When you activate your account initially, you will be presented with the option to receive all forms electronically as a default, rather than by mail. You may also change the preferred delivery method at any time within your Shareworks account; refer to the next question for instructions on doing so. Note: If you have selected electronic delivery, the default delivery method will revert to mail if you terminate employment with your company. 5. How do I change my tax form delivery method? You can change the delivery method for forms issued by Solium by completing the following steps: 1. Log into your Shareworks account at 2. Click the My Profile tab. 3. Click Manage Document Delivery under the Personal Profile section. 4. The following screen will allow you to review the Electronic Delivery of Tax Forms agreement. Select Yes if you would like to request online delivery or No if you would prefer to receive a mailed version. 5. Click Confirm to complete your request. 6. If you wish to change back to your previous selection, follow the same instructions to change your setting again. Note: This election takes effect on a prospective basis and does not affect forms that have already been issued to you prior to making this request. 6. Where will my electronic forms be posted? Select the Tax Documents tab in your Shareworks account to view your tax forms once they are ready. Note: This tab will not appear until Solium issues an electronic form to you for the first time. You will also receive an notification letting you know once a new form has been posted. 7. I have not received my tax forms. What should I do? If you have not received your forms electronically or by mail within the respective delivery time frame, contact the Participant Services Group at for assistance. TAX REPORTING FOR STOCK OPTION PLANS 8. What is a qualified or non-qualified stock option? A qualified stock option is one that meets specific tax qualification criteria and reporting requirements under Section 422(b) of the Internal Revenue Code. This type of option is also called an Incentive Stock Option ( ISO ). Any type of option that does not meet this criteria is considered a non-qualified stock option ( NQSO ) or a non-statutory stock option. ISOs and NQSOs have different requirements and treatment varies from a taxation perspective. Note: Because of the complexities of stock option taxation and reporting, you should always contact a qualified tax advisor to determine the specific impact of any exercises and dispositions Annual Tax Form Guide for US Companies 6

7 9. What is the tax treatment for shares acquired from an ISO exercise? Shares acquired from an ISO are generally taxed in the year of disposition (e.g., sale). The tax treatment depends on the length of time the shares are held between exercise and sale: if the shares are held for longer than two years from the grant date AND one year from the exercise date, the disposition is considered qualifying for preferential tax treatment. If the holding period is not met, the disposition is disqualifying from preferential tax treatment. Depending on the type of disposition, the resulting income may be reportable by your employer on your Form W-2 (ordinary income component), which you then report as part of your compensation income on your tax return. The capital gain/loss component is calculated using Form 8949, with the resulting total transferred to the Schedule D. Refer to Question 12 for more information on other tax ramifications of ISOs. 10. What is the difference in the tax treatment between a qualifying and disqualifying disposition for shares exercised from an ISO? For a qualifying disposition, all of the gain from the sale (difference between sale price and grant price) is treated as long-term capital gains and is reported on a Form 8949/Schedule D. For a disqualifying disposition, a portion of or all of the gain may be reported as ordinary income on your Form W-2; this amount is equal to the lesser of (a) the actual gain from the sale OR (b) the difference between the fair market value and grant price on the exercise date. If the latter, any additional gain from the sale above that amount reported on the Form W-2 is reportable as capital gains on a Form 8949/Schedule D. 11. Does my company withhold taxes when I sell shares acquired from an ISO exercise? Even though your company may be required to report ordinary income associated with an ISO disposition on your Form W-2, they are not required to withhold any income taxes. This means you will be responsible for paying associated taxes once you file your tax return. Sales of shares exercised from ISOs are subject only to federal and state (if applicable) taxes. No Social Security or Medicare taxes apply. 12. Are there other tax ramifications associated with an ISO exercise? If you exercise and hold shares from an ISO past December 31 of the year of exercise, the shares may be subject to Alternative Minimum Tax ( AMT ) even though they have not yet been disposed. Consult with a professional tax advisor if this situation applies to you. There is also a tax exception for residents/taxpayers of Pennsylvania, which does not recognize the federal treatment of ISOs; for such exercises, your company is obligated to report income and withhold taxes at the time of exercise for Pennsylvania state tax purposes, similar to the treatment of a NQSO exercise Annual Tax Form Guide for US Companies 7

8 13. What is Form 3921 and why will I receive one for an ISO exercise? If you exercised an ISO during 2017, you will receive an informational statement compliant with Form 3921 (subject to Internal Revenue Code Section 6039). This statement contains information that you will need when you file your taxes for the year in which you dispose of the shares. This form is also filed with the Internal Revenue Service (the IRS ) by Solium. Note: Your company may have opted to distribute these statements to participants and file with the IRS directly or through a third-party, rather than through Solium. 14. Why am I receiving a disposition survey for shares acquired from an ISO exercise? Disposition surveys are sent to plan participants who transferred shares exercised from ISOs to another broker and may have sold the resulting shares within You are obligated to notify your company when you dispose of these shares, so any related ordinary income associated with the sale is reported accurately on your Form W-2. The survey helps to collect the information required by your company to report these transactions properly to the IRS. Failure to report dispositions correctly on your tax forms and filing return may result in IRS penalties and fees to you and/or your company, so please complete and return the form in a timely manner if you sold these shares in Disposition surveys are posted electronically to active Shareworks accounts when possible; you will receive an notification once a form is made available. If posting to your account is not feasible, the survey will be mailed to your home address on record. 15. What is the tax treatment for shares acquired from a NQSO exercise? Shares acquired from NQSOs are taxed on the exercise date, even if the shares are not sold immediately as part of the exercise. The spread (e.g., difference between the fair market value and the grant price) on exercise date is reportable as ordinary income on your Form W-2 (for employees) or Form 1099-MISC (for non-employees) in the year of exercise, and your company is required to withhold income and payroll taxes on this gain at the time of exercise. The adjusted or stepped-up cost basis for shares exercised from NQSOs is equal to the grant price plus any related ordinary income component reported on your Form W-2 or Form 1099-MISC. If you sell the shares at a later date, any additional capital gain or loss from the adjusted cost basis is reportable on a Form 8949/Schedule D for the year in which the shares are disposed. 16. When I sell shares acquired from an exercise, how are my sale proceeds reported to the IRS? Generally when you sell shares exercised from a stock option, Solium issues a Form 1099-B reporting the relevant sale information. This includes the sale of shares to cover taxes and fee obligations. This form is provided to you for tax reporting purposes and filed with the IRS by Solium Annual Tax Form Guide for US Companies 8

9 17. Will I receive a Form 1099-B for a cashless (same-day-sale) exercise? Although the IRS provides a specific exemption for the issuance of a Form 1099-B for cashless (same-day-sale) exercises where the fair market value is defined as the sale price, Solium issues a Form 1099-B for all cashless exercises, regardless of the exemption eligibility. Prior to 2015, Solium did not issue Forms 1099-B for transactions that met the exemption criteria. 18. Will the Form 1099-B reflect my cost basis for shares exercised from stock options? As required by the IRS, the Form 1099-B shows a simplified cost basis for stock option shares sold within the year. For both ISOs and NQSOs, this cost basis is equal to the grant price. However, this may not be the correct cost basis for purposes of calculating capital gain/loss when filing your tax return for the year in which the shares are disposed. Refer to Question 34 and 37 for more information on adjusting the cost basis on your tax return. TAX REPORTING FOR RESTRICTED STOCK AWARD/UNIT PLANS 19. What is the tax treatment for shares acquired from restricted stock awards/units? Shares acquired from restricted stock awards ( RSAs ) and restricted stock units ( RSUs ) are generally taxed on the vest date, even if the shares are not sold immediately as part of the release. The value of the shares on the vest date is reportable as ordinary income on your Form W-2 (for employees) or Form 1099-MISC (for non-employees) in the year of release, and your company is required to withhold income and payroll taxes on this gain at the time of vesting. The adjusted or stepped-up cost basis for shares received from RSAs or RSUs is equal to the ordinary income component reported on your Form W-2 or Form 1099-MISC. If you sell the shares at a later date, any additional capital gain or loss from the adjusted cost basis is reportable on a Form 8949/Schedule D for the year in which the shares are disposed. Note: There may be exceptions to these rules, such as a Section 83(b) election at grant or tax deferral at vesting. If these situations apply to you, contact your company administrator for further assistance, as this content is outside the scope of this Guide. Because of the complexities of restricted stock taxation and reporting, you should always contact a qualified tax advisor to determine the specific impact of any vestings and dispositions. 20. When I sell shares acquired from a restricted stock award/unit release, how are my sale proceeds reported to the IRS? Generally when you sell shares received from RSAs or RSUs, Solium issues a Form 1099-B reporting the relevant sale information. This includes the sale of shares to cover taxes and fee obligations. This form is provided to you for tax reporting purposes and filed with the IRS. 21. Will the Form 1099-B reflect my cost basis for shares received from a restricted stock award/ unit release? Although the IRS does not require the reporting of cost basis for RSA and RSU shares that are acquired at zero cost on a Form 1099-B, Solium includes this information on the statement 2017 Annual Tax Form Guide for US Companies 9

10 (if known). Solium reports the adjusted cost basis for such shares, equal to the award price plus any related ordinary income component reported on your Form W-2 or Form 1099-MISC - generally the fair market value on vest date. Any difference between the net proceeds on the disposition and the adjusted cost basis will need to be reported by you as a capital gain/loss on a Form 8949/Schedule D. TAX REPORTING FOR EMPLOYEE STOCK PURCHASE PLANS 22. What is a qualified or non-qualified ESPP? A qualified ESPP is one that meets specific tax qualification criteria and reporting requirements under Section 423 of the Internal Revenue Code. Any type of ESPP that does not meet these criteria is considered a non-qualified purchase plan. Qualified and non-qualified ESPPs are treated differently from a taxation perspective. Note: Because of the complexities of ESPP taxation and reporting (particularly with qualified plans), you should always contact a qualified tax advisor to determine the specific impact of any purchases and dispositions. 23. What is the tax treatment for shares acquired under a qualified ESPP? Shares acquired from a qualified ESPP are generally taxed in the year of disposition (e.g., sale). The tax treatment depends on the length of time the shares are held between purchase and sale: if the shares are held for longer than two years from the offering date AND one year from the purchase date, the disposition is considered qualifying for preferential tax treatment. If the holding period is not met, the disposition is disqualifying from preferential tax treatment. Depending on the type of disposition, the resulting income may be reportable by your employer on your Form W-2 (ordinary income component), which you then report as part of your compensation income on your tax return. The capital gain/loss component is calculated using Form 8949, with the resulting total transferred to the Schedule D. 24. What is the tax treatment for shares acquired under a non-qualified ESPP? Shares acquired from a non-qualified ESPP are taxed on the purchase date, even if the shares are not sold immediately as part of the purchase. The spread (e.g., difference between the fair market value and the purchase price) on purchase date is reportable as ordinary income on your Form W-2 (for employees) or Form 1099-MISC (for non-employees) in the year of purchase, and your company is required to withhold income and payroll taxes on this spread at the time of purchase. The adjusted or stepped-up cost basis for shares exercised from a non-qualified ESPP is equal to the purchase price plus any related ordinary income component reported on your Form W-2 or Form 1099-MISC. If you sell the shares at a later date, any additional capital gain or loss from the adjusted cost basis is reportable on a Form 8949/Schedule D for the year in which the shares are disposed Annual Tax Form Guide for US Companies 10

11 25. When I sell shares acquired from an ESPP, how are my sale proceeds reported to the IRS? Generally when you sell shares received from an ESPP, Solium issues a Form 1099-B reporting the relevant sale information. This form is provided to you for tax reporting purposes and filed with the IRS by Solium. 26. Will the Form 1099-B reflect my cost basis for a sale of shares acquired from an ESPP? As required by the IRS, the Form 1099-B shows a simplified cost basis for shares acquired from an ESPP which are sold within the year. For both qualified and non-qualified ESPPs, this cost basis is equal to the purchase price. However, this may not be the correct cost basis for purposes of calculating capital gain/loss when filing your tax return for the year in which the shares are disposed. Refer to Questions 34 and 37 for more information on adjusting the cost basis on your tax return. 27. What is Form 3922 and why will I receive one for an ESPP purchase? You will receive an informational substitute statement compliant with Form 3922 (subject to Internal Revenue Code Section 6039) if you purchased shares under a qualified ESPP and initially deposited the shares with Solium during This statement contains information that you will need when you file your taxes for the year in which you dispose of the shares. This information is also filed with the IRS by Solium. Note: Your company may have opted to distribute these statements to participants and file with the IRS directly or through a third-party, rather than through Solium. 28. Why am I receiving a disposition survey for shares acquired under an ESPP? Disposition surveys are sent to plan participants who transferred shares received from a qualified ESPP to another broker and may have sold the resulting shares within You are obligated to notify your company when you dispose of these shares, so any related ordinary income is reported accurately on your Form W-2. The survey helps to collect the information required by your company to report these transactions properly to the IRS. Failure to report any dispositions correctly on your tax forms and filing return may result in IRS penalties and fees to you and/or your company. 29. Are there other tax ramifications associated with qualified ESPPs? There is a tax exception for residents/taxpayers of Pennsylvania, which does not recognize the federal treatment of qualified ESPPs; for purchases under such a program, your company is obligated to report income and withhold taxes at the time of purchase for Pennsylvania state tax purposes, similar to the treatment of a NQSO exercise. TAX REPORTING BASICS 30. What documents do I need in order to report my equity award transactions on my tax return? You will need the following: 2017 Annual Tax Form Guide for US Companies 11

12 Form W-2 (or Form 1099-MISC for non-employees) shows any related ordinary income and tax payments associated with equity awards that are required to be reported by your company Confirmations of equity plan transactions occurring in 2017 used to identify ordinary income amounts reported on a Form W-2 or Form 1099-MISC; can be obtained from Shareworks or your plan administrator Form 3921 for ISO exercises or Form 3922 for Section 423 ESPP purchases (if applicable) provides necessary exercise or purchase details to determine specific ordinary income and/or capital gains/loss resulting from dispositions of these shares; these forms may have been issued to you in a prior year if the shares were purchased before 2017 Form 1099-B (if applicable) shows sale information Form 1099-DIV (if applicable) displays income received and any taxes paid related to dividends; will be provided in a composite statement with a Form 1099-B if both types of forms are to be issued For non-resident taxpayers outside of the US, you may receive a Form 1042-S if you earned reportable dividend income. You will need that form, along with any other income statements similar to those above, for tax reporting in your own jurisdiction. 31. What is ordinary income and where is it reported? Ordinary income is income, such as that from stock compensation, that is taxed at ordinary (rather than capital gains) rates under the Internal Revenue Code. It is normally reported on a Form W-2 for employees or a Form 1099-MISC for non-employees by the employer. Certain types of equity plan transactions may result in reportable ordinary income; the company may also be obligated to withhold taxes on this income at the time of a transaction. Employees report the income on their tax returns as part of salary and compensation income (typically Line 7 of IRS Form 1040). 32. What is capital gain/loss and where is it reported? Capital gain/loss results from the disposition of a capital asset, such as stocks. This type of income (or loss) is reported on a Form 8949/Schedule D on your tax return. Whether the gain/loss is short- or long-term depends on how long the asset was held from the time of acquisition; the standard holding period for long-term capital gains is a minimum of twelve months. Short-term capital gains are typically taxed at rates similar to ordinary income, while long-term capital gains are taxed at lower rates. Conducting certain types of equity plan transactions may result in reportable capital gains or loss; you are responsible for reporting these amounts on your tax return and remitting any associated taxes to the IRS at that time. 33. What is cost basis? Cost basis refers to the amount paid to acquire shares. This may include a simplified cost basis, such as the grant price for shares exercised from stock options or purchase price for shares purchased in an ESPP, or a full value basis as in the case of shares gained from restricted stock awards/units. Cost basis is generally reported on the Form 1099-B when shares are sold Annual Tax Form Guide for US Companies 12

13 In situations where the simplified basis has been reported on a Form 1099-B, you may need to add to that amount to any compensation income associated with acquiring the shares that was reported on your Form W-2 or Form 1099-MISC. The two added together are usually referred to as adjusted or stepped-up cost basis. Adjusted cost basis is what is needed to correctly calculate any additional capital gains or loss reported on the Form 8949/Schedule D on your tax return. 34. Can I use the cost basis amount provided on my Form 1099-B to calculate taxable gain? Because of the complexities in determining cost basis for certain types of equity plan shares and the differences in IRS-mandated Form 1099-B reporting requirements for cost basis, it is possible that your Form 1099-B may not report the cost basis of the shares fully. Adjusting the cost basis on your tax return will be important in order to avoid double taxation if the Form 1099-B is underreporting the cost basis amount. The good news is that it is very simple to make a cost basis adjustment on your tax return. To do so, complete the Form 8949, which is a supporting document required to be filed with a Schedule D. On this form, you indicate the basis that was reported on the Form 1099-B and in another column, enter in the amount of compensation income reported on your Form W-2 that was not included in the basis on the Form 1099-B. This adjusts the gain or loss, which is the indirect way you adjust the basis on Form You can then transfer the totals on Form 8949 to your Schedule D to calculate your total correct capital gains/loss for all your security sales (for guidance, see the annotated diagrams of Form 8949 in Question 37). Prepare to have appropriate documentation to support your corrected basis in the event the IRS requests this information. 35. How do I confirm whether my company reported ordinary income on my Form W-2, and if so, how much was reported, in order to adjust my cost basis? You may be able to confirm this information by first generating a transaction statement for your exercises, releases, and purchases within your Shareworks account. Your payroll department may then be able to confirm specific reporting amounts. This is most critical for the reporting of stock option or stock purchase plan shares, where only the grant or purchase price is reported on the Form 1099-B and a basis adjustment may need to be calculated on the Form 8949 as part of the Schedule D. Note: Cost basis information within your Shareworks account may be indicated using the term book value. 36. What happens if the cost basis reported on my Form 1099-B needs to be adjusted to include ordinary income reported on my Form 1099-B? To handle that, you report on Form 8949 the basis shown on Form 1099-B and then adjust it elsewhere on Form 8949, as explained in Questions 34 and How do I complete the Form 8949 as part of the Schedule D? Before completing the Schedule D, you need to fill out the Form 8949 listing the various transactions that occurred during the year that contribute to your capital gain/loss total. You can also use Form 8949 to adjust your cost basis from the amount reported on the Form B if needed Annual Tax Form Guide for US Companies 13

14 The diagram below shows how to report a sale of shares acquired from a non-qualified award type and sold in a cashless (same-day-sale) exercise, resulting in short-term capital gains: 2017 Annual Tax Form Guide for US Companies 14

15 The diagram below shows how to report a sale of shares acquired from restricted stock vesting and sold at least 12 months later, resulting in long-term capital gains: Multiple transactions may be included on the Form 8949 in order to reconcile the amounts reported on the Form 1099-B and to help you calculate total capital gain/loss. The totals may then be transferred to the Schedule D. Before using these diagrams, consult your own tax advisor. These diagrams (provided by mystockoptions.com, an independent source of stock plan education and tools) illustrate the reporting rules and are not customized for your own tax situation Annual Tax Form Guide for US Companies 15

16 38. How do I complete the Schedule D on my tax return? Once you have calculated your total capital gain/loss on Form 8949, you may complete the Schedule D with the information computed on Form Use the column totals from Form 8949 from Form 8949 to complete Schedule D, where you determine your total long- and short-term capital gains and losses. The diagram below shows how to report short-term gains or losses on a Schedule D: The diagram below shows how to report long-term gains or losses on a Schedule D: Before using these diagrams, consult your own tax advisor. These diagrams (provided by mystockoptions.com, an independent source of stock plan education and tools) illustrate the reporting rules and are not customized for your own tax situation Annual Tax Form Guide for US Companies 16

17 39. Do the sale proceeds on my Form 1099-B include any commissions/fees I paid for the transaction? No, the proceeds reported on the Form 1099-B subtract any commissions/fees paid for the transaction(s) reported. 40. What if my Form W-2 or Form 1099-B is incorrect? Contact your company if you believe there is an error on your Form W-2. For corrections related to a Form 1099-B issued by Solium, contact the Participant Services Group at or help@solium.com. Make sure to notify the appropriate contact as soon as the matter is identified to ensure adequate time to generate a corrected (pre-irs filing) or amended (post-irs filing) form if necessary. If the issue pertains solely to the cost basis reported on your Form 1099-B, you can make this adjustment on the Form 8949 as part of the Schedule D as noted above without having to request a corrected or amended form. Technically, in this case your Form 1099-B is not actually incorrect. Rather, the cost basis is omitted or too low because, under the IRS rules, the Form 1099-B does not include compensation income reported on your Form W-2 as part of the basis. 41. Why do my Solium statements look different than the types of forms provided on the IRS website? Whenever possible, Solium issues substitute or composite statements to simplify the reporting process and minimize mailing costs. Currently we send substitute statements for transactions related to Forms 3921 and 3922 (if Solium issues these forms for your company) and composite statements for Forms 1099-B and Form 1099-DIV (if you qualify to receive both types). Substitute or composite statements are formats approved by the IRS that enable efficient reporting of transactions to taxpayers. Typically, a tax form allows for the reporting of a single transaction only. This could be onerous for both the issuer of the forms and the recipient if the individual performed multiple transactions of the same type in the same year. A substitute statement allows the issuer of the forms to aggregate multiple transactions of the same type into a single document following an acceptable format that substitutes for the official IRS form, rather than generating and mailing separate documents for each transaction. A composite statement allows for the aggregation of different types of transactions onto a single document following acceptable IRS standards. Note: there are some cases where these formats cannot be used, in which case Solium may use the official forms issued by the IRS. 42. Who should I contact if I have any questions about tax forms issued by Solium? Contact the Participant Services Group at or help@solium.com for assistance. As noted, Solium does not provide tax advice and recommends consulting a professional tax advisor for assistance in interpreting the various types of tax forms and completing your tax returns appropriately Annual Tax Form Guide for US Companies 17

18 About Solium Since 1999, Solium (TSX: SUM) has been helping companies decomplexify their share plans. Our software, Shareworks, brings all the key elements of share plan administration together in one powerful cloud-based solution. Now you can collaborate, share, comply, trade, model, support decisions, create reports and control your plan more simply, securely and brilliantly. Solium has offices in North America, UK & EMEA and Asia Pacific. solium.com