My employer didn’t report my option income on my W-2!

October 17, 2011

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


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?



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, “Executive Tax and Financial Planning For Non-Qualified Stock Options”.

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