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Subject:   ISO Tax filing
Date:   Wed, 2 Jan 2002
From:   Pat

As an employer, we have an employee that exercised her stock options at the end of 2001. This is a first occurrence for our company and we did not have the reporting set up with our payroll company. Can we report the information on a 1099-Misc? If so, should it be reported in Box 3? Thanks for your help.

Answer

Hello Pat,

No. Assuming this was a non-qualified stock option, the income should be reported on Form W-2. The ordinary income is subject to payroll taxes. You might need to prepare amended payroll tax returns and Form W-2c (corrected Form W-2). See your accountant for help.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.