Here are 4 big tax pitfalls to watch for after stock option moves
For example, if you paid $20 and the market value that day was $30, your spread at exercise is $10, which gets added to the $20 purchase price for a basis of $30.
However, if you use the $20 basis, which may be listed in box 1e of your 1099-B, you'll be paying taxes on an extra gain of $10 per share. In that scenario, you can fix the mistake by adjusting your profit or loss on Form 8949 in column g, Brumberg said. You can learn more about this issueIncentive stock options, another type of equity-based compensation, won't add to yearly income.
When you owe AMT, you're prepaying taxes that you can recoup in future years, Hasling explained. That's because it creates AMT credits that you can use to offset levies once regular taxes exceed AMT. If you've exercised stock options, it's critical to keep track of exercise prices, market values and tax withholdings to compare with details on your W-2 and 1099-B forms, Ransom-Cooper said.
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