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What is an employee stock purchase plan (ESPP) and how is the income reported and taxed?
Contributed by KeriC, FreeTaxUSA Agent, Tax Pro In many employer stock purchase plans (ESPP), the purchase of stocks takes place through payroll deductions by making contributions to a stock purchase fund. The employer then uses those funds to purchase the stock for you. In many plans, the price the employee pays for the…
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How do I report nonqualified stock options (NSO) or non-statutory stock options (NSQO or NQO)?
Contributed by KeriC, FreeTaxUSA Agent, Tax Pro Income from the exercise of non-statutory stock option If your employer grants you a non-statutory stock option (NSO), the amount of income to include, and the time to include it, depends on whether the fair market value of the option can be readily determined. Readily…
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How are incentive (or statutory) stock options (ISO) taxed? and reported?
Contributed by KeriC, FreeTaxUSA Agent, Tax Pro The primary advantage of an incentive stock option (ISO) lies in its favorable tax treatment compared to other types of stock options. Qualifying ISOs only generate reportable income when the stock is sold. Qualifying and Disqualifying ISO A qualifying ISO meets the holding…
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Can I withdrawal money from my retirement account without having to pay the 10% penalty?
Contributed by: PhillipB, FreeTaxUSA Agent, Tax Pro Most current retirement plans are designed for you to keep money in the account so that the funds accumulate to provide income when you retire. For that purpose, the 10% early distribution penalty was enacted. If a taxpayer takes money out of their retirement account…
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What are restricted stock units (RSU)?
Contributed by KeriC, FreeTaxUSA Agent, Tax Pro Restricted Stock Units or RSU's are similar to incentive stock options, but an RSU is taxed when it vests, whereas an Incentive Stock Option (ISO) is taxed when it's exercised. When the RSU vests, the total value of the vested shares will be included in your wages shown in…
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How do I file open market stock options on my tax return?
Contributed by: KeriC, FreeTaxUSA Agent, Tax Pro Stock options purchased on the open market do not need to be reported to the IRS. However, when you sell a stock option on the open market, the sale must be reported on Schedule D of your tax return. If you sell stocks or options that you have held for one year or less and…
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How are clergy wages reported to the IRS and taxed on your return?
Contributed by: PhillipB, FreeTaxUSA Agent, Tax Pro The income, Social Security, and Medicare tax situation for members of the clergy is very different from the tax situation of average employees. Members of the clergy have the following major differences: Clergy wages are exempt from Social Security and Medicare tax…
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What is an employee stock ownership plan (ESOP)?
Contributed by KeriC, FreeTaxUSA Agent, Tax Pro An Employee Stock Ownership Plan, or ESOP, allows employees to own stock in the company without having to purchase shares. The company contributes its stock (or money to buy stock) into an ESOP trust, which holds the shares for employees. This is done over time, allowing…
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Can I write off a loan that didn’t get paid back?
Contributed by: KristineS, FreeTaxUSA Agent, Tax Pro If you loaned money to a friend, family member, or other personal acquaintance with the understanding they’d pay it back, and then they didn’t, you likely have a non-business bad debt. While this might affect the relationship in a bad way, it might also affect your tax…
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Reporting Employee Stock Options
Contributed by KeriC, FreeTaxUSA, Tax Pro Employee stock options and employee stock purchase plans (ESPP) can be used by employers as a form of compensation or as a benefit. Stock options and ESPPs can involve giving highly valued employees a certain amount of stock after a specified period of time at little to no cost or…