Question

Exercise & Hold non-qualified stock options

Forum|Forum|3 years ago
March 5, 2023
1 reply
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I exercised & held some non-qualified stock options. Financial institution completed the transaction and also paid the associated Federal & State taxes from my account. The differential is reported on my W-2 (Code V); but not included in W-2 (box 1) or taxes (box 2). How do I enter this in TurboTax (taxes paid or stock purchased)

Thank you

D

DavidD66

The difference between your exercise price and the market price at the time you exercised your non-qualified stock options (NQSOs) is considered compensation and should have been added to box 1 of your W-2 by your employer. I suggest you double check to make sure it was not included. If they did not, should request a corrected W-2 with the amount added to box 1. If it was not included and they won't issue a corrected W-2, you will have to report it on your tax return. To do so, while logged in to your return:

Click on Federal
Click on Income & Expenses
Scroll to the bottom of the "Your income and expenses" page, and click on "Less Common Income"
Click on "Show more"
At the bottom of the page, next to "Miscellaneous Income..." click on Start/Revisit
Select the first option "Other income not already reported on a Form W-2..."
And "Yes" to "Did you receive any other wages?"
Click past the next couple of screens until you get to "Did you earn any other wages?" Answer "Yes"
The program will guide you through entering your income.

How did the financial institution report to you the taxes they paid? Did they pay Social Security and Medicare on behalf of your employer? Did they pay it on your behalf?

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E

eoquinnAuthor

Thanks for your prompt reply

Upon further research; the exercise & hold (stock option) compensation was reported on my W-2. along with all related taxes. Therefore, is there a need for me to separately report this transaction?

If I were to sell these shares next year; would the cost basis be the grant price or the fair market value at time of exercise?