Print This Page

Subject:   Question on NQSO: Where to report the exercise and hold
Date:   9 Mar 2008
From:   Siddhartha

Michael

I left my former employer last year. At the time I left, I exercised some NSOs and kept the shares. The option price was $0.04 and the fair market value on the exercise date was $0.25. It appears to me that my former employer didn’t include the income on my W-2.

Where do I report the income on my income tax return?

Thanks

Answer

Date:   14 Mar 2008

Hello Siddhartha,

First, you ask your former employer to reissue your W-2.

If it refuses, I suggest that you report the income as "other income" on line 21 of Form 1040.

Some tax return preparation software includes the income as an adjustment to Wages on line 7. That works, too.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, Non-Qualified 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.