How do you calculate cost basis for AMT?

How do you calculate cost basis for AMT?

For regular tax purposes, the cost basis of the ISO shares is the price paid—the exercise or strike price. For AMT purposes, the cost basis is the strike price plus the AMT adjustment—the amount reported on Form 6251, line 2i.

What are the tax implications of stock options?

With NSOs, you pay ordinary income taxes when you exercise the options, and capital gains taxes when you sell the shares. With ISOs, you only pay taxes when you sell the shares, either ordinary income or capital gains, depending on how long you held the shares first.

How is equity compensation taxed?

When you sell the shares, any gain is subject to the favorable long-term capital gains tax rate. The spread—the difference between the strike price and the market price on the date of exercise—is taxed as ordinary income in the year of exercise and is subject to income and payroll tax withholding.

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Do I need to report form 3921 on my tax return?

3921 is an informational form only. It is generally not entered on your tax return unless you then sold the stock, or if you could be subject to alternative minimum tax (AMT).

What is a 3921 tax form?

Form 3921 is an IRS Form that reports the exercise of an employee Incentive Stock Option (ISOs). Note that ISO’s can only be issued to startup employees, not contractors.

What information is required for form 3921 to be reported?

Form 3921 requires the company to report to the IRS information about an ISO exercise, including the exercise date, the exercise price, the fair market value (FMV) of the stock as of the exercise date, and the number of shares acquired.

Do I need to file Form 3921 for non-qualified stock options?

Please note that even though the corporation is not required to file Form 3921 when an employee exercises a non-qualified stock option, it must collect and report withholding taxes upon such exercise and will need to value common stock delivered to the employee for purposes of W-2 reporting.

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What happens if form 3921 identifies fair market value of shares?

Now if the Form 3921 identified the fair market value of the shares as $10 on the day you exercised, you would not have any amount to add to your AMT income in connection with this exercise of ISOs. What does the company need to do if a Form 3921 obligation is triggered?

What is the Amt form 3921?

But it’s different under the AMT income tax calculation and the Form 3921 gives the IRS a way to confirm income that is to be included in the calculation of your employee’s AMT liability. Let’s illustrate this with an example. Say that you exercised an ISO to acquire 100 shares of stock in 2017.