Brookline, MA (PRWEB) March 04, 2015
For people with stock compensation, every tax-return-filing season raises worries about errors that can lead to the overpayment of tax, IRS penalties, or even an IRS audit. This tax-return season presents more than the usual potential for confusion and expensive mistakes in IRS filings. The big changes for this year include modifications both in the major IRS form used to report stock sales and in the rules for reporting the cost basis of stock compensation.
Anyone who received income from equity compensation or sold shares in 2014 must understand the related reporting on IRS tax forms if they are to avoid costly errors on their tax returns. In the articles and FAQs of its Tax Center, myStockOptions.com http://www.mystockoptions.com provides clear, reliable guidance that can help stock compensation taxpayers and their tax-return preparers file accurate and error-free IRS tax returns. This concise content provides insights into the prevention of tax-return mistakes. Articles and FAQs spell out the most common errors people make with stock grants on their tax returns. Examples in plain English show taxpayers and their advisors how to report stock compensation and stock sales on tax returns. An interactive quiz on tax returns lets users test their understanding of the tax rules.
Taxpayers, Beware: Significant Changes In Cost-Basis Reporting On IRS Form 1099-B
In January or February, each broker sends IRS Form 1099-B, or the broker's equivalent substitute statement, to clients who sold shares during the tax year. The information on Form 1099-B is also reported to the IRS. The required stock-sale information on Form 1099-B was recently expanded and now includes not only the gross proceeds from stock sales but also their cost basis (sometimes called the tax basis), the date when the shares were acquired, and whether gains or losses were short-term or long-term.
Form 1099-B for stock sales during the 2014 tax year differs significantly from the 2013 version in several ways, including the following:
- The IRS redesigned the form to match its box numbers with the columns on Form 8949, which is used to report stock sales. The all-important cost-basis information is now in Box 1e instead of the previous Box 3. Also, for grants made in 2014 and later years, brokers are prohibited from including equity compensation income (as included on Form W-2) in the cost basis reported on Form 1099-B.
- A new box at the top center of Form 1099-B indicates the appropriate box to check near the top of Form 8949 when reporting the sale.
- The proceeds that brokers report must be net of commissions and fees.
- A new box (Box 1g) has been added for adjustments. Box 1g applies only to the amount of any nondeductible loss in a wash sale or to the amount of accrued market discount.
Articles and FAQs in the Tax Center explain the background, how to understand Form 1099-B after selling shares from stock compensation or an ESPP, and how to avoid mistakes with the cost basis that can lead to the overpayment of taxes:
- Article: How To Avoid Paying Too Much Tax: Understanding The Revised Form 1099-B And Form 8949 For Reporting Stock Sales On Your Tax Return
- FAQ: How have IRS Form 1099-B and cost-basis reporting changed for sales of stock acquired from my stock options, restricted stock, or ESPP? What do I need to do differently because of the changes?
- FAQ: What if the wrong cost basis is reported on my 1099-B? How do I report the right cost basis on Form 8949 of my tax return?
- Podcast: What's New For Reporting Stock Sales On Your Tax Return
- Video: Tax Return Forms & Reporting Rules For Stock Sales
Form 1099-B Affects Reporting On IRS Form 8949 And Schedule D
The revised Form 1099-B is essential for completing IRS Form 8949 and Schedule D, which taxpayers who sold shares during the tax year must submit with their IRS Form 1040 tax return. Form 8949 is where taxpayers list the details of each stock sale, using the information on Form 1099-B. Schedule D aggregates the column totals from Form 8949 to report total long-term and short-term capital gains and losses. However, the cost-basis information in Box 1e of Form 1099-B may be too low, or the box may be blank. This is because the new rules for cost-basis reporting are mandatory only for stock acquired in 2011 and later years. Additionally, no basis is reported for restricted stock or restricted stock units.
In the Tax Center, the special section Reporting Company Stock Sales presents FAQs with clearly annotated diagrams of Form 8949 and Schedule D. Each FAQ explains and illustrates a different reporting situation involving stock options, restricted stock, restricted stock units, performance shares, employee stock purchase plans, or stock appreciation rights. Clear instructions and diagrams show how to complete the forms, whether the cost-basis information in Box 1e of Form 1099-B is accurate, too low, or omitted.
With exclusive articles, 800+ FAQs, podcasts, videos, the Tax Center, interactive quizzes, the Learning Center with courses for CE credit, the Global Tax Guide, an extensive glossary, and dynamic patented tools, myStockOptions.com is the premier online resource of educational content and tools on stock options, restricted stock, restricted stock units, performance shares, stock appreciation rights, and employee stock purchase plans. myStockOptions.com is written and managed by leading experts in equity compensation, and is produced by a company with a long history of successful publications explaining complex legal and financial subjects in plain English.
For more information, please contact Bruce Brumberg and Matt Simon at 617-734-1979.