Determining your 2014 stock plan tax

Your Employee Stock Purchase Plan (for qualified plans)
STEP 1
STEP 2
STEP 3
STEP 4
STEP 5
FAQ
Determining your 2014
stock plan tax requirements
— a step-by-step guide
Only when you sell shares acquired from a qualified
ESPP does a taxable event occur. Upon selling shares,
you may have taxable ordinary income to report, in
addition to any capital gains or losses. To determine
your tax-reporting requirements, follow the steps
outlined in this document.
4
INSIDE
How to use the new
Supplemental Form
to avoid
overpaying taxes
14
Your Employee Stock Purchase Plan (for qualified plans)
STEP 2
STEP 1
STEP 4
FAQ
STEP 5
Gather the following documents.
Form/data
Where to find it
Who to call
Form W-2
This form will be provided by your
employer/company.
Your company’s payroll
department
IRS Form 1040 (the full
1040, not the 1040EZ or the
1040A), including Schedule D
Capital Gains and Losses
Forms are available online at www.irs.gov,
by calling 800.TAX.FORM (800.829.3676), or
by visiting your local IRS office.
Your local IRS office or
your tax advisor
IRS Form 8949
This form is available online at www.irs.gov,
by calling 800.TAX.FORM (800.829.3676),
or by visiting your local IRS office.
Your local IRS office or
your tax advisor
Form 1099-B
You can access the form online at
Fidelity.com/taxforms at the end of January.
In addition, a form will be mailed no later than
mid-February, if applicable.
A Fidelity Stock Plan
Services Representative
at the number provided
on the statement
NEW! 2014 Supplemental
Information (Fidelity is
providing you with additional
information to supplement your
1099-B due to new cost basis
regulations that require brokers to
no longer report ordinary income.)
You can access the form online at
Fidelity.com/taxforms at the end of January.
In addition, a form will be mailed no later than
mid-February, if applicable.
A Fidelity Stock Plan
Services Representative
at the number provided
on the statement
4
1
STEP 3
24
Your Employee Stock Purchase Plan (for qualified plans)
STEP 1
STEP 3
STEP 2
STEP 4
FAQ
STEP 5
Report your ordinary income.
2
Your company may report your ESPP income after you sell your stock on your W-2 as wages in
Box 1 if you are a salaried employee. Even if your company does not report the income from an
ESPP as compensation on your W-2, you are still responsible for properly reporting and paying
tax on the amount of ordinary income. In addition, you may owe tax on any capital gains
resulting from the sale of your stock, which is explained in later steps.
Example: IRS W-2 for ESPP & 1040
a Employee’s social security number
OMB No. 1545-0008
Safe, accurate,
FAST! Use
Visit the IRS website at
www.irs.gov/efile
b Employer identification number (EIN)
1 Wages, tips, other compensation
2 Federal income tax withheld
c Employer’s name, address, and ZIP code
3 Social security wages
4 Social security tax withheld
5 Medicare wages and tips
6 Medicare tax withheld
7 Social security tips
8 Allocated tips
9
d Control number
e Employee’s first name and initial
10 Dependent care benefits
Suff. 11 Nonqualified plans
Last name
13
Statutory
employee
Retirement
plan
12a See instructions for box 12
C
o
d
e
Third-party
sick pay
12b
C
o
d
e
Your employer may also
use this area to report
additional compensation.
12c
14 Other
C
o
d
e
12d
C
o
d
e
f Employee’s address and ZIP code
15 State
Form
Employer’s state ID number
W-2
Wage and Tax
Statement
16 State wages, tips, etc.
17 State income tax
2014
18 Local wages, tips, etc.
19 Local income tax
20 Locality name
Department of the Treasury—Internal Revenue Service
Copy B—To Be Filed With Employee’s FEDERAL Tax Return.
This information is being furnished to the Internal Revenue Service.
For illustrative purposes only.
ESPP income will usually be
included with your other
compensation in box 1.
ESPP income could be included
in boxes 16 and 18 if state and
local tax withholding applies.
W-2 or 1099-MISC
income is reported on
Line 7 of Form 1040.
4
For illustrative purposes only.
34
Your Employee Stock Purchase Plan (for qualified plans)
STEP
Step 11
3
STEP33
Step
STEP
Step 2
STEP
Step
4 4
FAQ
FAQ
STEP
Step
5 5
Assemble information on the
purchase and sale of your stock.
You will need to refer to two documents this year. Your Fidelity Brokerage 1099-B Tax-Reporting
Statement and your 2014 Supplemental Information Form. The Supplemental Form may contain
information that is not reported on your 1099-B due to new cost basis regulations. If the amounts on
these two forms differ, you’ll need to use information from both of these to complete your tax forms to
ensure you don’t overpay taxes.
Example: Fidelity Brokerage 1099-B Tax-Reporting Statement
1
2
FORM 1099-B*
3
4
5
6
7
2014 Proceeds from Broker and Barter Exchange Transactions
Copy B for Recipient OMB No. 1545-0715
Short-term transactions for which basis is reported to the IRS—report on Form 8949 with Box A checked and/or Schedule D, Part I
Proceeds are reported as gross proceeds unless otherwise indicated (a). (This Label is a Substitute for Boxes
& 6)
(IRS Form 1099-B box numbers are shown below in
type)
1a Description of property, Stock or Other Symbol, CUSIP
Action
Quantity
Date
Acquired
1c Date Sold
1d Proceeds
or Disposed
1e Cost or
1f Code, If Any
Other Basis
1g Adjustments
Gain/Loss (–)
4 Federal
14
16 State
Income Tax State
Tax
Withheld
THETA INC, THT, XXXXXXX
Sale
33.796 11/15/2013
03/15/2014
2,784.47
1,874.99
2,784.47
1,874.99
909.48
909.48
For illustrative purposes only.
— CUSIP (your company’s ticker/trading
symbol)
5
— Proceeds (gross proceeds from stock sale)
6
—C
ost or Other Basis (this is provided to
the IRS as directed, and may need to be
adjusted — see Supplemental Form)
7
— Gain/Loss (from the proceeds of the
sale and may also need to be
adjusted — see Supplemental Form)
2 — Quantity (number of shares sold)
3
4
— Date Acquired (date shares
purchased)
— Date Sold or Disposed
4
1
44
Continues
Your Employee Stock Purchase Plan (for qualified plans)
STEP 1
STEP 3
STEP 2
STEP 4
FAQ
STEP 5
Assemble information on the
purchase and sale of your stock.
3
NEW!
Example: New 2014 Supplemental Form
2014 Supplemental Information
Name
Acct # 123-456789
Customer Service # 888-888-8888
Recipient's ID # ***-**-****
Payer's Fed ID# ***-**-****
Note: This information is not reported to the IRS. It may assist you in tax return preparation.
8
9
10
Supplemental Stock Plan Lot Details
Short Term Transactions
Description, CUSIP
Based on the disposal method you have selected, the lots that appear on your 1099 Supplemental may differ from the lots on the 1099-B.
Grant Type (w) Quantity
Date of
Acquisition(x)
Date Sold or
Disposed
Proceeds
Ordinary
Income
Reported (y)
Adjusted Cost or
Other Basis (z)
Wash Sale Loss
Disallowed
Adjusted
Gain/Loss
XYZ Corp., 123456ABC
QSP
33.796
11/15/13
03/15/14
2,784.47
2,784.47
669.83
2,544.82
2,544.82
0.00
239.65
0.00
Short Term Adjusted Realized Gain
Short Term Adjusted Realized Loss
Wash Sale Loss Disallowed
239.65
0.00
For illustrative purposes only.
8
— Ordinary Income Reported (cross reference this with your company W-2 and input in Column G
of the 8949)
9
— Adjusted Cost Basis (this amount is used to recalculate your gain/loss and is equal to the
ordinary income plus the cost basis on your 1099-B)
10
— Adjusted Gain/Loss (recalculated per your new basis; proceeds minus your adjusted cost
basis — this amount goes on Column H of the 8949)
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4
Your Employee Stock Purchase Plan (for qualified plans)
STEP 1
4
STEP 2
STEP 3
STEP 4
FAQ
STEP 5
Use the forms to calculate your capital
gains and/or losses on IRS Form 8949
and IRS Form 1040, Schedule D.
Even though the ordinary income may be reported on your W-2, you still need to report the sale of the
stock on Form 8949 and carry over the amounts to Schedule D.* You will need both your 1099-B and
Supplemental Form to help you complete your tax forms.
In preparation of completing these forms, consider the following:
1. How long did you hold the shares before you sold them? This determines which section of Form 8949
to complete.
Form 8949 is divided into two parts. Determine which section you will need to complete:
• Part I is for short-term capital gains or losses. Short term is defined as selling the stock less than
one year from the date you acquired it.
• P
art II is for long-term capital gains and losses. Long term is defined as holding the stock for more
than one year from the date you acquired it.
oes the cost basis on your 1099-B match the amount on your Supplemental Form? If it doesn’t, you
2. D
may need to make an adjustment on Form 8949. This is because you may have already paid tax on
your ordinary income (as reported on your W-2) and you don’t want to pay taxes twice.
*State and local taxes may also apply and the rules governing such taxes may vary from federal income tax rules. Please consult your tax advisor.
64
4
Continues
Your Employee Stock Purchase Plan (for qualified plans)
STEP 1
4
STEP 2
STEP 3
STEP 4
FAQ
STEP 5
Use the forms to calculate your capital
gains and/or losses on IRS Form 8949
and IRS Form 1040, Schedule D.
To complete Form 8949 and
Schedule D, you need to know:
Example: ESPP Purchase and Sell after
Holding Short Term (held less than 1 year)
• Number of shares you sold
• The date of sale
• W
hen you acquired/
purchased those shares
• T
he gross proceeds from
the sale
• Your Cost Basis
• A
mount of ordinary income
(from Supplemental Form)
For illustrative purposes only.
74
4
Continues
Your Employee Stock Purchase Plan (for qualified plans)
STEP 1
4
STEP 2
STEP 3
STEP 4
FAQ
STEP 5
Use the forms to calculate your capital
gains and/or losses on IRS Form 8949
and IRS Form 1040, Schedule D.
To complete Form 8949 and
Schedule D, you need to know:
• Number of shares you sold
Example: ESPP Purchase and Sell after
Holding Long Term (held longer than 1 year)
Note: Qualified Dispositions will always be considered
long-term holdings.
• The date of sale
• W
hen you acquired/
purchased those shares
• T
he gross proceeds from
the sale
• Your Cost Basis
• A
mount of ordinary income
(from Supplemental Form)
For illustrative purposes only.
84
4
Your Employee Stock Purchase Plan (for qualified plans)
STEP 1
5
STEP 2
STEP 3
STEP 4
FAQ
STEP 5
Use IRS Form 8949 to calculate your capital gains
and/or losses on IRS Form 1040, Schedule D.
Gain or loss from the sale of the stock should be reflected on Form 8949 and Schedule D. How this is reflected is
dependent on whether the sale is short term (less than one year from the date the stock was acquired to the date
it was sold) or long term (more than one year from the date acquired to the date of sale).
Example: Short-Term Gains or Losses
Example: Long-Term Gains or Losses
For illustrative purposes only.
4
For illustrative purposes only.
94
Your Employee Stock Purchase Plan (for qualified plans)
STEP 1
STEP 3
STEP 2
STEP 4
STEP 5
FAQ
Frequently Asked Questions
Q:I have a “qualified” ESPP. What do “qualified dispositions” and “disqualified
dispositions” mean?
A:A qualified ESPP is provided under Section 423 of the Internal Revenue Code and is
“qualified” for special capital gains treatment if you hold your shares for a certain
period of time. See the example below:
What is the date shares were purchased and when did you sell those shares?
Grant Date/
Beginning of
Offering Period
1/1/2012
Disqualified Disposition
Year 1
Qualified Disposition
Year 2
Purchase Date
Sold
2/1/2013
1/2/2014
For Example:
Grant date/Beginning of offering period: 1/1/2012
Date shares purchased for you: 2/1/2013
Date you sold these shares: 1/2/2014
{
Year 3
You have a disqualified disposition because even
though you sold two years after the grant date, it
was not yet a year after the purchase.
Q:Will I owe other taxes beyond federal tax when I sell my stock?
A:State and local taxes may also apply, and the rules governing such taxes may vary
from federal income tax rules. Please consult your tax advisor for more information.
Go back to the Fidelity SPS Resource Center
If you have questions, a Fidelity Stock Plan Services Representative can help. Call 800.544.9354.
Tax laws are complex and subject to change. State and local taxes may also apply, and the rules governing such taxes may vary from federal
income tax rules. Your actual income tax consequences depend on your individual circumstances. Therefore, you should always consult a qualified
tax advisor regarding your own particular tax situation.
Fidelity Brokerage Services LLC, Member NYSE, SIPC
Fidelity Stock Plan Services, LLC
© 2015 FMR LLC. All rights reserved.
710946.1.0 1.901664.105SPS-ESPP-TAX-PDF-0215