IRS rules can lead to overpaying taxes on stock sales. Here's how to prevent this:
on this topic prohibit brokers from reporting the compensation portion for stock grants made on or after January 1, 2014.
Therefore, for sales of company stock acquired from most grants of equity compensation and ESPPs, brokers will report to the IRS and you the unadjusted partial basis for all grants. No basis is reported for restricted stock and RSUs, as they are not acquired for cash and are consideredYou exercised nonqualified stock options at $10 when the market price was $25, and you sold all the shares at exercise. Your Form W-2 shows $15 per share of compensation income, which together with your purchase/exercise price of $10 gives you a cost basis of $25 per share. However, Form 1099-B reports a cost basis of only $10.
in what it has reported to you and the IRS, as it is simply following the IRS rules. myStockOptions.com, a resource on financial planning and taxation for all types of equity compensation, recommends certain steps for the 2019 tax season to avoid overpaying taxes if an incomplete cost basis was reported to the IRS on Form 1099-B.On Part 1 or Part 2 of IRS Form 8949, start by entering the reported cost basis in column ,"Amount of adjustment.
will be a negative number , as the incorrectly low basis reported on Form 1099-B will have made your gain too large .In addition, column on Form 8949 has the title"Code from instructions." This column is used to explain, with a special code, why there is an adjustment in column . For understatements in the cost basis, which can happen with stock compensation, you insert Code B in column . This indicates that the basis on Form 1099-B is incorrect and should be higher than what is shown.
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