The high tax-return season is upon us, and this one is a doozy. Tax reporting for stock compensation is complex to begin with. On top of that, IRS tax forms and reporting have changed yet again for the 2020 tax season (for 2019 tax returns), adding yet more confusion to an already complicated process.
As we all know, tax mistakes can be very painful. With these and the multitude of other tax changes in recent years, the 2020 tax season presents more potential than ever for confusion and expensive mistakes in IRS filings for the millions of people in the United States who received income in 2019 from employee stock compensation and sales of company shares.
myStockOptions.com explains the tax-return forms and reporting you need to know in its fully updated Tax Center. This clear and reliable information includes easy-to-understand guidance and annotated tax forms. The website's goal is to help you and your financial or tax advisors realize the full potential of equity compensation. The last thing you want is to pay too much tax or incur IRS penalties that take yet more money out of your pocket.
This blog commentary gives a helpful overview of the tax-return content on myStockOptions.com to help you during tax season 2020.
What Taxpayers Need To Know About The Changes In Tax Forms And Reporting
The IRS Form 1040 tax return, condensed in 2018, has been revised again for the 2019 tax year. The numbered schedules (supplementary forms) of Form 1040 have been reduced to three (Schedules 1, 2, 3). On the IRS Form 1040, total capital gain or loss on Schedule D is once again entered directly on IRS Form 1040, not on Schedule 1 as it was last year. The AMT calculation total on Form 6251 is entered on a different line of Schedule 2.
An article and an FAQ at myStockOptions.com explain everything that taxpayers with stock comp must know about the changes in tax forms and reporting:
the myStockOptions Tax Center has all the answers on the filing and reporting of tax returns that involve stock options, restricted stock, restricted stock units, performance shares, stock appreciation rights, and employee stock purchase plans.
- Core articles and FAQs spell out the most common mistakes people make with stock grants on their tax returns. Taxpayers, their financial advisors, and their accountants can quickly run through these to be sure they submit error-free returns.
- The reporting of stock sales is made clear by special FAQs with annotated how-to diagrams of IRS tax-return forms.
- Diagrams of Form W-2, Form 3922 (for employee stock purchase plans), and Form 3921 (for incentive stock options) show how companies report equity compensation income to employees.
- Animated videos include a succinct tutorial on key IRS tax forms related to stock-sale reporting and a video guide to avoiding costly mistakes that can lead to the overpayment of taxes.
- Engaging podcasts convey tips for tax returns.
- A fun interactive quiz on tax-return topics lets users test their reporting knowledge in a painless way, before they file their returns, and links to related content from the answer key.
- A separate website on nonqualified deferred compensation at taxes: myNQDC.com
Confusing Rules For Reporting Stock Sales
By mid-February, each brokerage firm sends IRS Form 1099-B, or the firm's equivalent substitute statement, to clients who sold shares during the tax year. The information on Form 1099-B is also reported to the IRS. A diverse set of content at myStockOptions.com relates the background issues, explains how to understand Form 1099-B after selling shares from stock compensation or an ESPP, and shows how to avoid mistakes with the cost basis that can lead to the overpayment of taxes:
Form 1099-B is essential for completing IRS Form 8949 and Schedule D. Taxpayers who sold shares during the tax year must submit those forms with their IRS Form 1040 tax returns. Form 8949 is where taxpayers list the details of each stock sale, using the information on Form 1099-B. Schedule D aggregates the column totals from Form 8949 to report total long-term and short-term capital gains and losses. The total from Schedule D is entered on the Form 1040 return.
However, the cost-basis information in Box 1e of Form 1099-B may be too low, or the box may be blank. This is because the rules for cost-basis reporting are somewhat counterintuitive. Also, no basis is reported for restricted stock or restricted stock units.
Sound confusing? It is.
In the myStockOptions Tax Center, the special section Reporting Stock Sales presents FAQs with clearly annotated diagrams of Form 8949 and Schedule D. Each FAQ explains and illustrates a different reporting situation involving stock options, restricted stock, restricted stock units, performance shares, employee stock purchase plans, or stock appreciation rights. Clear instructions and diagrams show how to complete the forms, whether the cost-basis information in Box 1e of Form 1099-B is accurate, too low, or omitted.
Demystifying IRS Forms 3922 And 3921
Elsewhere on myStockOptions.com, a pair of articles explains IRS Form 3922 for employee stock purchase plans and IRS Form 3921 for incentive stock options. With annotated examples of the forms that translate IRS jargon into understandable language, these articles, along with detailed FAQs (for both ESPPs and ISOs), clarify what taxpayers need to understand about the information provided by the forms, which can help them better understand the complexities of ESPP or ISO taxation. The forms can help with tax-return reporting. They also give the IRS tools for catching errors on the tax returns of people who sold ESPP or ISO stock.
Corporate Licensing Available
For companies, education is vital for ensuring that stock compensation motivates and retains highly valued employees and executives. The expert yet reader-friendly content at myStockOptions.com is ideally suited for licensing by companies and stock plan providers for their stock plan participants. A customized version of the website's award-winning content can be seamlessly woven into companies' HR, benefits, and/or compensation portals. Accessible through any internet browser, 24 hours a day, 7 days a week, licensed content from myStockOptions.com lets stock plan participants answer their own questions about their stock grants whenever they need to learn more—saving time for the stock plan staff and costs for the company. Contact us for more information ([email protected] or 617-734-1979).
myStockOptions 2020 Conference: Register Now!
Registration is now open for the 2020 myStockOptions conference: Financial Planning For Public Company Executives & Key Employees, taking place on June 15 and 16 at the Hilton San Francisco Airport Bayfront. The conference is for financial advisors working with executives, directors, and highly compensated employees at public and private companies, as well as others interested in those topics. The event will start on the afternoon of June 15 with our Stock Compensation Bootcamp For Financial Advisors. A full day of conference sessions with expert speakers will follow on June 16. The agenda, speakers, and other details are available at the conference website.
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