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Stock options and taxes - member advice
This topic is discussed on the HPAA's Finance Forum. Ongoing discussions of US personal finance issues -- such as Social Security, pensions, and stock -- from an ex-HP/HPE perspective. Join the HPAA Finance Forum
Main HPAA page on stock issues -- contacts, employee stock, stock records, cost basis, options, SARs, etc. https://www.hpalumni.org/stock
Questions or comments to: email@example.com
You need both a W-2 from the company and a 1099-B from the broker. How to obtain your W-2
Employee stock options allow the holder to purchase shares at the specified ("strike") price after a defined holding or vesting period.
The options that most HP and HPE employees receive are termed "non-qualified" -- and do not have a value that can be determined before they are exercised:
- You do not realize any income when the options are GRANTED. (Unlike stock acquired through employee stock purchase and service awards.)
- When the options are exercised, the difference between the market price and the exercise price (that is, the discount times the number of shares) is treated as wage income. HP withholds taxes (including Social Security and Medicare tax) and issues a W-2 -- even if you are no longer an employee. This is income realized at the time of the EXERCISE.
Intuit's TurboTax website has an explanation and
some example tax scenarios:
When options are exercised, Merrill Lynch mails a
tax summary, which can also be downloaded from the Merrill Lynch website:
Note that the Merrill Lynch tax summary is only for reference. What HP has reported to the IRS is given on the W-2 form you received from HP.
(Here are HPAA's directions on how to get a missing HP W-2 -- including how to download immediately.)
[Marc Lee, Tom von Alten -- Apr 13, 2014]
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