ISO included in Box 1 in W-2

[AZ-Tax]

If the Incentive Stock Option in W-2 box 14 is included in W-2 box 1 but no Fed or State income tax is withheld, its my understanding the ISO proceeds is reported on Sch D since there is a 1099B issued but the ISO proceeds needs to be subtracted from the box 1 of the W-2 or its double taxed correct?

[ChEAr$]

the employer

If the Incentive Stock Option in W-2 box 14 is included in W-2 box 1 but no Fed or State income tax is withheld, its my understanding the ISO proceeds is reported on Sch D since there is a 1099B issued but the ISO proceeds needs to be subtracted from the box 1 of the W-2 or its double taxed correct?

should have provided supplemental information/documentation on just what occurred.
In such cases, the additional cost is taken out of proceeds of sale, so stock basis will
be the amount included on the W2 plus the added amount taken out of proceeds, so that
when all is said and one, client should have a loss equal to broker's commission.

[joanmcq]

the amount on the W-2 is the spread, the difference between the option price and the FMV on date of exercise. As Harlan said, it is added to the basis, so the gain is NOT double taxed. Subtract it from the wages on line 7 and your client will get a nasty letter from the IRS in about 11 months.

[KC-CPA]

Client has W-2 with box 14 noting ISO (Incentive Stock Option) 75K, RSU (Restricted Stock) $29K; there is nothing in box 12 with a V (this is how I generally see stock options handled)

Both amounts appear to be included in box 1 of W-2, although client tells me $75K is not, however if I take his base salary plus the $75K and 29K, I get the number in box 1 (He tells me ISO's don't go on W-2)

I have statements from Broker showing taxes withheld for Restricted $29K amount, No taxes were withheld on the ISO $75K.

For Medicare Box 5, only wage items are the base salary and Restricted stock amount (it does not include the $75K) Should Medicare not be included the ISO amount?

I do have a 3921 that supports the ISO share amount.

I also have a 3922 that shows shares granted and exercised - do not see any info. for this anywhere else - I think this is only a AMT issue?

I think I have all the pieces and know what to do but just want to get some additional feedback/expertise

ISO - need to report on Schedule D and basis should include what's on W-2?

RSU - Should this be treated the same and schedule D and include basis, even though taxes were withheld? The broker statement indicates in tax treatment Sell for Taxes.

Do I need to do anything with the 3922?

Thanks.

[mooretax]

always have 1099-B and company statement

Always ask for 1099-B and company statement.
The company statement will show more details about the transaction.

See page 12 of 2014 publication 525 to report the type of stock transaction

http://www.irs.gov/pub/irs-pdf/p525.pdf