Why am I reporting income for my stock options twice?

ToyotaDriver Member, Star Posts: 12
edited August 2023 in Income

I exercised stock options this year. They withheld some stock to cover taxes and they told me they were adding some income to my W-2 to tax me for the options. I also received a Form 1099-B that seems to be reporting the options as well and I am paying tax on the income in two places.

Best Answer

  • mactax
    mactax FreeTaxUSA Team Posts: 1
    Answer ✓

    Stock compensation plans provide access to free or discounted shares of company stock for their employees.

    The IRS considers the fair market value (FMV) of free or discounted shares of stock as taxable compensation income that needs to be reported on Form W-2.

    The IRS also requires the sale of your company stock to be reported on Form 1099-B. Usually, the broker can only show your basis as being the amount that you paid for your company stock or zero if the stock options were granted for free to you.

    You need to adjust your basis for the amount of income that was added to your W-2 income.

    Most major brokers will provide a stock plan supplemental statement which will break down how the W-2 income should be added to your company stock basis for your Form 1099-B.

    Usually, once you have adjusted your basis for the W-2 income, your taxable gain from the sale of company stock is very small. 

    FreeTaxUSA supports both form 1099-B and W-2.