Do you know the tax implications of your non-qualified stock options? For general information, request Michael Gray’s special report, “Non-Qualified Stock Options – Executive Tax and Financial Planning Strategies”. For answers to specific questions, bookmark this page and read the list below for questions Michael Gray has already answered. For answers to new questions, subscribe to our newsletter, Michael Gray, CPA’s Option Alert.

General NQSO Questions	Reducing Taxes	Tax Implications
Incentive vs. Non-Qualified	Fair Market Value	Non-Qualified Stock Swaps
Other Questions	Find Out More	Keep Up to Date

General Non-Qualified Stock Options Questions

• What is a Non-Qualified Stock Option?
• Is there a difference between nonstatutory and nonqualified stock options?
• Do I have employee stock options?
• Have the tax laws changed since your FAQs were written?
• Do I have to report a stock sale on my tax return?
• What taxes will apply when I exercise non-qualified stock options?
• Are my NQO proceeds a gain or loss on Schedule D?
• What should I expect following a stock sale?
• Is my company’s estimate of my options valid?
• Can worthless NQSOs be used for a tax benefit?
• How do I report gains on my stock option sale?
• Should I withhold taxes for a contractor-turned-employee?
• What do I report on schedule D when exercising options?
• Why doesn’t the IRS see option income I reported?
• When are my NQOs taxed if I have to hold them 5 years?
• After exercising non-qualified stock options, will I owe money next April 15th?
• What are the pros, cons and alternatives to NQSOs?
• Is it better to exercise options or purchase stock at the same price?
• Do we have to pay cash to exercise non-qualified options?
• Do I need to report a gain for exercising NQSOs?
• Should my option exercise withholding show on my 1099-B?
• Do I need to report option sales on Schedule D?
• Do I need to report NQO income on schedule D?
• When are taxes due on non-qualified stock options?
• Do I have to exercise my stock options right away?
• Aren’t capital gains taxes an advantage of holding NQOs?
• Do I have to pay tax on the price of my options?
• Do I categorize my NQSO sale as an exercise and sale?
• Where does the tax withheld by my employer go on my W-2?
• Is there any reporting necessary if I received no income?
• How do I find someone to purchase my stock?
• How can I avoid having to pay a tax without receiving the money to pay for it?
• Does an exercised option become stock?
• Do non-qualified stock options need to be exercised in date order?
• What is the difference between a non-qualified performance stock plan and non-qualified stock options?
• Must I accept my employer’s valuation of their stock?
• Will the withholding requirement apply to privately held companies?
• Do I need to pay for my NQSOs before making an 83(b) election?
• What are the advantages of using warrants rather than NQSOs?
• Do I have to sell my non-qualified stock options?
• How could I figure out whether it’s best to exercise and hold or just exercise?
• Which is right, the exercise form sent by my company or Turbo Tax?
• How do I report the profit from my exercise of non-qualified stock options?
• I’m moving to the next tax bracket – do I need to pay estimated taxes?
• What happens to my non-qualified stock options if my company’s stock splits?

Reducing Taxes

• Why isn’t holding NQSOs after exercise a tax benefit?
• Should I exercise non-qualified options to take a tax loss?
• Can I take a capital loss for underwater stock options?
• Can capital losses offset gains on NQOs and restricted stock?
• Can I offset a stock option gain with capital losses?
• Can I protect employees from losses from NQOs?
• Can I “hedge” my NQOs by using traded options?
• Can I lower my taxes by buying and holding my non-qualified stock options?
• How long must I hold exercised NQSOs to qualify them as long-term capital gains?
• What is the difference between exercising now and later?
• Can I deduct trading losses against gains?
• Can we avoid taxes by transferring shares to our children?
• Do the wash sale rules apply to the alternative minimum tax?
• Can I trade my non-qualified stock options for a like investment?
• Can I avoid taxes by transfering my non-qualified stock options to a foreign bank account?
• Can an individual offset gain from non-qualified stock exercises with short term capital losses?
• Should I exercise my ISOs and NQSOs in the same year?
• Can I defer taxes by exercising my nqso directly into an IRA?
• Can I use my SARSEP funds to purchase and hold my stock options?
• Can I use IRA funds to exercise my stock options?
• Can I avoid taxes by giving my options to charity?
• Any advice on gifting nqos to a charitable remainder trust?
• Can I minimize the tax impact of my stock options with an offshore entity?
• Do I need to pay ordinary income AND capital gains taxes?
• Can I transfer my NQSOs to an LLC for favorable taxation?

Tax Implications

• When are non-qualified stock options taxed?
• Which tax form do I use to report NQSO sales?
• How should I fill out my tax forms for NQSO stock?
• How are held NQSOs taxed when they’re sold?
• Can I exercise non-qualified stock options for short term capital gains?
• Is there any advantage to exercising and holding NQSOs?
• What taxes are withheld for NQO exercises?
• How much should I have withheld for my option exercise?
• My employer didn’t report my option income on my W-2!
• Do NQSOs qualify for installment sale reporting?
• Do I have to pay taxes on NQSOs allocated to my ex-wife?
• What types of taxes are required to be withheld on exercise of stock options?
• Do I have to pay taxes on options in a public company converted from stock options I held in private company it purchased?
• Is withholding required for non-employees with stock options?
• Do I owe California tax on options granted in Washington?
• What is the difference between a stock grant and NQOs?
• What are the results for a cashless NQSO transaction?
• Can we deduct our loss on options in a bankrupt company?
• When are taxes due on non-qualified stock options?
• Is a loss of stock from non-qualified options deductible?
• What part of the FICA do I need to pay?
• Are option right sales long term capital gains?
• Do I need to indicate an early exercise on my tax returns?
• Can I delay my income from NQSOs by holding the stock?
• Is income reported for a NQSO exercise in the year of exercise or sale?
• Is there a tax on the state level when an NQSO is exercised?
• If I worked in one state and live in another, in which state are my nqsos taxed?
• Does holding NQSO’s change their income status from “ordinary” to capital gains?
• What are the tax implications of exercising and holding NQSO’s?
• How can I owe more in taxes than my stock is worth?
• What is the tax treatment of NQSOs for employees who have been laid off?
• How will withholding and reporting work when I retire?
• What happens when a private company I have NQSOs in goes out of business?
• Do employers withhold taxes for NQSOs for non-employees?
• What are the tax implications of cashless NQO exercise?
• What is the withholding for a cashless exercise?
• Can a company withhold shares to pay the taxes?
• Is any tax due at the time of receipt?
• How can I pay taxes on non-qualified stock options in a private company?
• Is there any advantage to exercising non-qualified options that are under water?
• How are death taxes calculated on unexercised non-qualified stock options?
• What are the penalties for not withholding tax at the time of exercise?
• Is there a House Bill that would enable gain on the exercise of NQSO to be treated as capital gain?
• What are the tax implications of gifting NQSOs?
• What happens if I transfer NQSOs to my kids?
• Can I gift non-qualified options to family overseas?
• Do I have to pay US taxes on my stock option exercise?
• When will I be taxed on non-qualified stock options?
• Do I have to pay ordinary taxes at exercise and report gains on Schedule D?
• Will vesting non-qualified options result in W-2 income?
• When do you pay ordinary income, and when capital gains?
• What are the tax implications of being compensated with cash, equity, and nqsos?
• At the end of the year how will cashing in some stock options effect my normal payroll withholdings?
• Should I sell shares of stock that I own outright or exercise and sell nqos?
• Can I put private stock in my IRA?
• Can I get employment tax withholding back from exercising NQSOs?
• How does the 83(b) election work?
• What are the consequences of the 83(b) election?
• How do I get a refund for a bad fair market value?
• Are NQSOs eligible for a basis adjustment after a death?

Incentive and Non-Qualified Stock Options

• Should I sell stock options this year or next year?
• Does the holding period apply to non-qualified stock options?
• Should I take NQSOs now or wait for ISOs?
• Are my ISOs now NQSOs since I retired?
• Can NQSOs be converted into ISOs?
• What are the company benefits of NQSOs over ISOs?
• Should I exercise my ISOs and NQSOs in the same year?
• What are the real advantages of incentive stock options vs non-qualified options?
• What is the difference between iso and nqso same-day sales?

Fair Market Value

• What are the reporting requirements for underwater NQOs?
• What if the stock price is lower than my option price?
• Are private company stock options exercisable?
• How should I value my privately held stock?
• Do I have to use the market price for my stock options?
• Are there any advantages to being given stock options priced higher than fair market value?
• How can I determine the fair market value for my stock if the company will not provide the information?
• How is the Fair Market Value determined for a private company?
• Is my company required to hire an independent source to determine the fair market value of shares?
• Valuing Stock For Employee Stock Option Transactions

Stock Swaps

• Stock Swap To Exercise Non-Qualified Employee Stock Option
• What is the benefit of using stock swaps to fund NQSO exercises?
• Are NQSO exercises currently taxable?
• Will swapping shares to pay taxes be tax free?

Other

• Can an option labeled NQSO be treated as an ISO?
• How do I sell private company stock?
• Do I need to report stock from a privately held company?
• Can a company let me keep options after I leave employment?
• Do buying companies pay employees for unexercised options?
• Where can I get the number of stock options I have?
• Can my corporation receive NQSOs?
• Is NQSO income qualified for Roth IRA contributions?
• In which state should my stock option income be taxed?
• Is option income subject to California tax even if I move?
• Do I have to pay Connecticut taxes since I moved to Florida?
• How do I exercise options from overseas?
• How do I sell shares in private bank stock?
• How can I sell stock that has declined in value?
• Do successors have any rights to unvested options?
• Can I get a tax deduction for worthless stock options?
• What happens to my options if the company goes bankrupt?
• What happens to my options if the company is acquired?
• Who pays social security taxes on NQSOs?
• Will exercising NQSOs impact my social security benefits?
• Can my non-qualified stock options be taken away?
• What is the death tax on stock options?
• Can I transfer an NQSO to my child’s college fund?
• Is there a tax benefit from investing options in an LLP/LLC?
• Is it possible to transfer stock options to another person in a divorce?
• Can I transfer my stock to my wife to avoid having to exercise?
• What are the tax considerations for giving options to a family member?
• How will incentive and non-qualified stock options affect an estate?
• What happens to Non-Qualified Stock Options when the holder dies?
• Do Non-Qualified Stock Options disqualify me from a SIMPLE?
• What are the tax implications of a stock split for non-US residents?
• Is the exercise price of stock options adjusted for stock splits?
• Which tax jurisdiction applies for my restricted stock purchase?
• Am I due any compensation for a stock grant deemed worthless?
• If a non-qualified employee stock option is transferred to a bankruptcy trust, what would be the tax treatment for the corporation and the employee?
• How do I inform the IRS or state tax authority when I issue non-qualified stock options to my employees?
• What are the company’s reporting requirements for NQSOs?
• Where can I find information about using stock to pay contractors?
• Should a former employee’s NQSO exercises be reported on a 1099 or W-2?
• When do I issue a 1099-MISC vs a W-2 for NQSO exercises?

Find Out More

For general information, request Michael Gray’s special report, “Non-Qualified Stock Options – Executive Tax and Financial Planning Strategies”. Or, check out our book, Secrets of Tax Planning For Employee Stock Options, Stock Grants and ESOPs, by Michael Gray, CPA.

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