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Posted by removeps-groups@yahoo.com on April 10, 2008, 11:35 am
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On Apr 8, 6:57 pm, bark...@yahoo.com wrote:
> I exercised nonqualified stock options in 2007. I still own the
> shares. Thanks to this group, I learned that the "benefit" from
> exercising should be reported as income. If I don't have a W-2, (I've
> contacted the company to no avail. I haven't worked for them for 9
> years) do I just add that amount to my other W-2 income?
No, I did some research and found that you do have to pay the
employer's and employee's portion of FICA. Roughly, I calculate this
to be between 9.1% and 15.3% additional tax. The lower rate applies
if your existing other W2 income is already 97500.
http://www.fairmark.com/execcomp/nqoexer.htm
<Quote>
Non-employees
If you're not an employee of the company that granted the option,
withholding won't apply when you exercise it. The income should be
reported to you on Form 1099-MISC instead of Form W-2. Remember that
this is compensation for services. In general this income will be
subject to the self-employment tax as well as federal and state income
tax.
</Quote>
So would report the income on Schedule C, pay the employer and
employee part of SS, etc.
If you wrote the income only on line 7 (wages), then you would also
fill out the form for paying the employee's portion of social security
ane medicare (form 8919). But the FICA tax here is half of the above
method.
http://www.irs.gov/pub/irs-pdf/f8919.pdf
But talk to an accountant to see if you can get away with reporting
the income on line 21 (Other Income). This way you don't have to pay
the FICA tax. I don't think it's doable though.
> Since I'm using TurboTax, should I just create a w-2 with as much info
> about the company as possible?
No, that doesn't sound right. It wouldn't match what's in the IRS
records.
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