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Tax Filing Basics For Stock Plan Transactions
Tax Filing Basics For Stock Plan Transactions
5
How to Calculate Your Cost Basis
Steps to Report Your
Stock Plan Transaction
8 Terms You Should Know
Tax reporting for stock plan transactions can be confusing.
8 Have Questions?
Understanding the federal income tax laws and regulations
along with knowing which Internal Revenue Service (IRS)
Forms must be filed can be overwhelming. Important Note: This guide is not intended
to be comprehensive tax advice or replace
If you sell stock as a result of participation in your company’s the advice of a tax advisor. We recommend
stock plan, you may need to: you seek the counsel of a certified tax
professional to obtain personalized and
• Refer to the cost basis provided by Shareworks comprehensive guidance.
by Morgan Stanley
• Make any adjustments to it, if necessary
• Determine whether you have realized a capital gain or loss
Company Form Form W-21 Form W-2 is the Wage and Tax Statement Your company will
from your employer. send this to you.
IRS Forms Form 8949 Form 8949 is used to report sales and other dispositions Visit your local IRS office
of capital assets to the IRS. or call 800-TAXFORM.
Go to www.irs.gov.
Schedule D Schedule D (Form 1040) is used to report
(Form 1040) your capital gains and losses to the IRS.
Shareworks Form 1099-B 2 Form 1099-B reports any sale transactions completed Shareworks by
by Morgan Stanley during the year and backup withholding applied to the Morgan Stanley generally
Forms transaction (if any). sends this to you by
February 15 of the year
You may receive more than one Form 1099-B from following your transaction.
Shareworks by Morgan Stanley.
Go to
Form 1099-DIV Form 1099-DIV shows any reported dividend payments and www.stockplanconnect.com.
certain other distributions received throughout the year. From the home page,
select: Documents >
Tax Documents, or Tax
Form 480.6A Form 480.6A reports dividend income and/or gross proceeds Resources > Documents.
(Puerto Rico less commissions and fees. The numbers reported on the
residents only) 480.6A are the same amounts that the firm reports to the
IRS on Forms 1099-DIV and 1099-B.
Depending on the type of stock plan transaction, Shareworks by Morgan Stanley may send the following documents:
Employee Stock Purchase Plan (ESPP) You will receive a … Confirmation and
Sell Share(s) From ESPP Quarterly Account Statement
Restricted Stock Long Shares You will receive a … Confirmation and
Sell Long Shares From Your Account Quarterly Account Statement
Note: If you’ve received a distribution from a cash-settled award, such as a restricted cash plan, the income and taxes will generally be reported
on your Form W-2 from your company. Shareworks by Morgan Stanley does not report on this type of transaction. This summary does not address
tax forms and reporting applicable to U.S. non-residents, such as Form 1042-S. Please contact your company with any questions.
1
If you are not an employee but received compensation, the company may send Form 1099-NEC instead of Form W-2. You will also receive
information about your exercise of an ISO on Form 3921 and your transfer of stock acquired through an ESPP on Form 3922. These statements
include exercise date, exercise price and fair market value at exercise, as well as additional information.
2
Keep in mind, not all transactions generate a Form 1099-B.
3
Your cost basis in your shares may differ depending on your particular
facts and circumstances, including whether a section 83(b) election
was made or the timing of vesting. Please consult your tax advisor to
determine the accurate cost basis in your particular circumstances.
1
Find your Grant/Award
2
Refer to Column B to see
3
Determine if an adjustment is necessary
4
Consider if a “wash sale”
type and transaction the cost basis reported in Column C and how it is calculated. applies to you.
type in Column A. on Form 1099-B. (The “full” cost basis is determined by
adding Column B and C together.)
Cashless Exercise5 Grant Price: Calculate the difference between the Sale Price and the
(Number of shares sold x Grant Price) Grant Price multiplied by the number of shares sold.
STC Grant Price: Calculate the difference between the FMV at exercise and
(Number of shares sold x Grant Price) the Grant Price multiplied by the number of shares sold.
Employee Stock Purchase Plan
Disqualifying Disposition (§ 423 Plan) Purchase Price: The spread between the purchase price and the FMV
or sale of shares acquired under a (Number of shares sold x of the stock on the purchase date.
non-§ 423 Plan with a discount Purchase Price)
Assuming no Section 83(b) election was made and you did not make a payment in exchange for the restricted stock.
4
If your company relies on IRS relief from Form 1099-B reporting for cashless exercise, you will not receive a Form 1099-B for your cashless exercise(s)
5
EXHIBIT 1
Assuming no Section 83(b) election was made and you did not make a payment in exchange for the restricted stock.
6
EXHIBIT 2
Step 2
Compare the taxable amount to your Form
W-2, which reflects your wages, tips and other
compensation amount. In this example, see box 14
(Exhibit 2a). Keep in mind, compensation could be
reflected in multiple boxes on your Form W-2.
EXHIBIT 4
Step 4
Calculate your gains and/or losses
2020 using Form 8949 — Sales and Other
Dispositions of Capital Assets (See
Exhibit 4a). Enter your cost basis and
any applicable adjustments. Refer back
to page 4 for information on cost basis.
EXHIBIT 5
Step 5
Carry over the subtotals resulting on
2020 Form 8949 to Schedule D (Form 1040)
(See Exhibit 5a).
COST BASIS. The cost of shares used to calculate your gains or losses for Have Questions?
tax purposes. If you have questions on:
• Adjusted Cost Basis. The cost of shares for tax purposes (usually the purchase
FORM W-2
or acquisition price), adjusted for certain events such as wash sales, stock splits,
Contact your company’s
dividends, taxable compensation and return of capital distributions.
payroll department.
• Covered Transaction. With a covered transaction, the cost basis for Form 1099-B
reportable transactions must be reported to the IRS by Shareworks by IRS TAX FORMS
Morgan Stanley. Visit your local IRS office, call
• Noncovered Transaction. With a noncovered transaction, the cost basis for 800-TAXFORM or go to www.irs.gov.
Form 1099-B reportable transactions is not reported to the IRS by Shareworks
SHAREWORKS BY
by Morgan Stanley.
MORGAN STANLEY DOCUMENTS
DISPOSITION. Another word for the sale or transfer of stock. For copies of your documents:
• Disqualifying Disposition. If the required holding period of more than two years Go to StockPlan Connect at
from offering/grant and more than one year from purchase is not met on shares w ww.stockplanconnect.com.
sold from a Section 423 ESPP or the exercise of an ISO grant, the sale is considered
From the home page, select:
a disqualifying disposition and therefore results in certain tax consequences.
• Documents > Tax Documents, or
• Qualifying Disposition. If the holding period requirement is met before selling
• Tax Resources > Documents
the shares, the sale price will determine whether both ordinary income and
capital gains apply.
Shareworks by Morgan Stanley and its affiliates (“Shareworks”) do not provide tax or legal advice. Individuals should consult their tax advisor for matters
involving taxation and tax planning and their attorney for matters involving legal matters. Tax laws are complex and subject to change. The information
contained herein is based on the tax laws in effect as of January 1, 2020. Shareworks assumes no responsibility to update this material in the event of
such changes in tax law. Consult your tax advisor regarding any changes to these laws.
© Shareworks by Morgan Stanley services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries
of Morgan Stanley.