Determining your 2014 stock plan tax requirements a step-by-step guide

Transcription

1 Determining your 201 stock plan tax requirements a step-by-step guide INSIDE How to use the new Supplemental Form to avoid overpaying taxes When you exercise or sell shares acquired from a stock-settled plan, you may have taxable ordinary compensation income to report when you file your tax return, in addition to potential capital gains or losses. To determine your tax-reporting requirements, follow the steps outlined in this document. 1

2 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 employer/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 no later than mid-february, if applicable. A Fidelity Stock Plan Services Representative at the number provided on the statement NEW! 201 Supplemental Information (Fidelity is providing you with additional information to supplement your 1099-B due to new cost basis regulations that require brokers to no longer report ordinary income.) You can access the form online at Fidelity.com/taxforms at the end of January. In addition, a form will be mailed no later than mid-february, if applicable. A Fidelity Stock Plan Services Representative at the number provided on the statement *You will not receive a 1099-B for cash-settled or phantom shares. This form only applies to any shares of stock you held and subsequently sold. 2

3 2 Report your ordinary income. The exercise of a Stock Appreciation Right (SAR) is treated as compensation, and you will be required to pay ordinary income tax on the gain at exercise. This amount should be reported on your W-2 or 1099-MISC (if you are a nonemployee of the company) provided by your company along with any tax withholding that may have occurred. It is the spread (the difference between the net sales price and your tax basis per share) at the time of the exercise that is treated as taxable compensation. In addition, you may owe tax on any capital gains resulting from the sale of your stock from the exercise, which is explained in later steps. Example: IRS W-2 for SARs & 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. 11 Nonqualified plans 12a See instructions for box 12 C 13 Statutory employee 1 Other 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 Retirement plan Third-party sick pay o d e 12b C o d e 12c C o d e 12d C o d e Statement 201 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. Department of the Treasury Internal Revenue Service The amount of the spread is included in boxes 1 and 5 and also in box 3 up to the maximum wage base. SARs spread is included in boxes 16 and 18. Boxes 17 and 19 show any state and local tax withholdings. Federal taxes withheld are included in boxes 2 and 6 and in box up to the maximum wage base. W-2 or 1099-MISC income is reported on Line 7 of Form

4 Step 1 Step 2 Step 3 Step Step 5 FAQ 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 201 Supplemental Information Form. The Supplemental Form may contain information that is not reported on your 1099-B due to new cost basis regulations. If the amounts on these two forms differ, you ll need to use information from both of these to complete your tax forms to ensure you don t overpay in taxes. Example: Fidelity Brokerage 1099-B Tax-Reporting Statement FORM 1099-B* 201 Proceeds from Broker and Barter Exchange Transactions Copy B for Recipient OMB No 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 & 6) (IRS Form 1099-B box numbers are shown below in type) 1a Description of property, Stock or Other Symbol, CUSIP Action Quantity Date 1c Date Sold 1d Proceeds 1e Cost or 1f Code, If Any Gain/Loss ( ) Federal 1 16 State Acquired or Disposed Other Basis 1g Adjustments Income Tax State Tax Withheld THETA INC, THT, XXXXXXX Sale /20/201 02/20/201, , ,36.38, , , 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 Supplemental Form) 7 Gain/Loss (from the proceeds of the sale and may also need to be adjusted see Supplemental Form) Continues

5 3 Assemble information on the purchase and sale of your stock. NEW! Example: New 201 Supplemental Form 201 Supplemental Information Name Acct # Customer Service # Recipient's ID # ***-**-**** Payer's Fed ID# ***-**-**** Note: This information is not reported to the IRS. It may assist you in tax return preparation Supplemental Stock Plan Lot Details Short Term Transactions Description, CUSIP 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. Grant Type (w) Quantity XYZ Corp., 12356ABC Date of Acquisition(x) Date Sold or Disposed Proceeds Ordinary Income Reported (y) Adjusted Cost or Other Basis (z) Wash Sale Loss Disallowed Adjusted Gain/Loss SAR /20/1 02/20/1, , , , , Short Term Adjusted Realized Gain 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 the 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 the 899) 5

6 Use the information from IRS Form 1099-B to complete IRS Form 899 and IRS Form 100, Schedule D. 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, which will be net of commission Your cost basis Amount of ordinary income (from Supplemental Form) Example: SAR Exercise and Hold with sale after 12 months (held long-term) 6

7 5 Use IRS Form 899 to calculate your capital gains and/or losses on IRS Form 100, Schedule D. Gain or loss from the sale of the stock should be reflected on Form 899 and Schedule D. How this is reflected is dependent 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). Example: Short-Term Gains or Losses Example: Long-Term Gains or Losses 7

8 Frequently Asked Questions Q: I also receive cash-settled SARs. Why didn t I receive a 1099-B after I exercised those? A: Cash-settled SAR transactions result in no sale of stock; instead, you are given the cash value of the stock. As a result, your W-2 or 1099-MISC will show the income from the transaction (similar to a bonus payment). For stock-settled SARs, you will receive a W-2 or 1099-MISC in the year of exercise, as well as a Fidelity-issued 1099-B in the year you sell the stock you received from the exercise. Q: Where can I see how much tax my employer withheld on my SAR exercise? A: You should be able to see these amounts reflected on your W-2. Also, if your employer provided this information to Fidelity, tax withholding amounts will be listed on your monthly statement or your transaction confirmation. Q: If I already had money taken from my brokerage account at exercise to pay withholding taxes, will I owe more taxes when I sell those shares? A: The spread at exercise should have already been reported to the IRS on Form W-2 (and was included in your income for the year of exercise). At sale, you are taxed on the capital gain or loss as calculated by the difference between the net sale price and your adjusted cost basis per share (i.e., the total spread at exercise divided by the number of shares received for the spread, which equals the stock price at exercise). When you report the sale of the shares acquired in the SARs exercise on Form 899 and Schedule D, you avoid paying tax twice on the spread by adding it to your cost basis (i.e., not the stock price at grant plus the spread). 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. Go back to the Fidelity SPS Resource Center If you have questions, a Fidelity Stock Plan Services Representative can help. Call For specifics on what your company uses as fair market value, please see your plan documents, as the fair market value may vary. 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 own particular tax situation. Fidelity Brokerage Services LLC, Member NYSE, SIPC Fidelity Stock Plan Services, LLC 2015 FMR LLC. All rights reserved SAR-TAX-PDF-0215