What is the correct way to report incentive stock options (ISO) on federal taxes?
I'm assuming this was a cashless exercise because you had income show up on your w-2. When I had a similar situation, I did the following: If you made $50,000 in salary and $10,000 in stock options then your W-2 now says $60,000. You'll record that on your taxes just like it was regular income.  You'll also get a form that talks about your stock sale.   But remember, you bought and sold the stock within seconds.  Your forms will probably look like this: Bought stock: $10,000 Sold stock: $10,000 + $50 commission Total profit (loss): ($50) From the Turbotax/IRS view point, you lost $50 on the sale of the stock because you paid the commission, but the buy and sell prices were identical or nearly identical.
"The IRS W-8BEN form (PDF link), titled ""Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding"", certifies that you are not an American for tax purposes, so they won't withhold tax on your U.S. income. You're also to use W-8BEN to identify your country of residence and corresponding tax identification number for tax treaty purposes.  For instance, if you live in the U.K., which has a tax treaty with the U.S., your W-8BEN would indicate to the U.S. that you are not an American, and that your U.S. income is to be taxed by the U.K. instead of tax withheld in the U.S. I've filled in that form a couple of times when opening stock trading accounts here in Canada.  It was requested by the broker because in all likelihood I'd end up purchasing U.S.-listed stocks that would pay dividends.  The W-8BEN is needed in order to reduce the U.S. withholding taxes on those dividends. So I would say that the ad revenue provider is requesting you file one so they don't need to withhold full U.S. taxes on your ad revenue. Detailed instructions on the W-8BEN form are also available from the IRS: Instruction W-8BEN (PDF link). On the subject of ad revenue, Google also has some information about W8-BEN: Why can't I submit a W8-BEN form as an individual?" You need to file IRS Form 1040-NR. The IRS's website provides instructions. For every document that the IRS posts, there will be a correlating instructions page. This would be the instructions for the 1099-B, here. Furthermore, as you will be reporting this on Form 8949, as a substitute for previously used Schedule D; instructions are here.This article explains that the best course of action is to donate the shares as the cost basis would switch to FMV (fair market value) of the assets today. But as this did not happen, I would recommend contacting the purchasing company directly. Being a share holder, and by purchasing the shares from the source, the accounting department should still have recorded the date of purchase along with the price sold. It may take effort to prove who you are, but if their accounting records are well documented, this will not be an issue.  If nothing else, claim a 100% capital gain on the entirety of the sale, and pay the tax. That is stated here. In the US you specify explicitly what stocks you're selling. Brokers now are required to keep track of cost basis and report it to the IRS on the 1099-B, so you have to tell the broker which position it is that you're closing. Usually, the default is FIFO (i.e.: when you sell, you're assumed to be closing the oldest position), but you can change it if you want. In the US you cannot average costs basis of stocks (you can for mutual funds), so you either do FIFO, LIFO (last position closed first), or specify the specific positions when you submit the sale order. The safe harbor provision is based on the tax you or the prior year. So in 2016 this helped you as your tax was substantially increased from 2015. However, by the same token in 2017 your safe harbor amount is going to be very high. Therefore if 2017 is similar you will owe penalties. The solution here is to make estimated tax payments in the quarters that you realize large gains. This is exactly what the estimated tax payments are for. Your estimate tax payments do not have to be the same. In fact if you have a sudden boost in earnings in quarter 3, then the IRS expects that quarter 3 estimated tax payment to be boosted. It matters because that is the requirement for the 83(b) selection to be valid. Since the context is 83(b) election, I assume you got stocks/options as compensation and didn't pay for them the FMV, thus it should have been included in your income for that year. If you didn't include the election letter - I can only guess that you also didn't include the income. Hence - you lost your election. If you did include the income and paid the tax accordingly, or if no tax was due (you actually paid the FMV), you may try amending the return and attaching the letter, but I'd suggest talking to a professional before doing it on your own. Make sure to keep a proof (USPS certified mailing receipt) of mailing the letter within the 30 days window. I am no expert on the situation nor do I pretend to act like one, but, as a business owner, allow me to give you my personal opinion. Option 3 is closest to what you want. Why? Well: This way, you have both the record of everything that was done, and also IRS can see exactly what happened. Another suggestion would be to ask the GnuCash maintainers and community directly. You can have a chat with them on their IRC channel #gnucash, send them an email, maybe find the answer in the documentation or wiki. Popular software apps usually have both support people and a helpful community, so if the above method is in any way inconvenient for you, you can give this one a try. Hope this helps! Robert I can make that election to pay taxes now (even though they aren't vested) based on the dollar value at the time they are granted? That is correct. You must file the election with the IRS within 30 days after the grant (and then attach a copy to that year's tax return). would I not pay any taxes on the gains because I already claimed them as income? No, you claim income based on the grant value, the gains after that are your taxable capital gains. The difference is that if you don't use 83(b) election - that would not be capital gains, but rather ordinary salary income. what happens if I quit / get terminated after paying taxes on un-vested shares? Do I lose those taxes, or do I get it back in a refund next year? Or would it be a deduction next year? You lose these taxes. That's the risk you're taking. Generally 83(b) election is not very useful for RSUs of established public companies. You take a large risk of forfeited taxes to save the difference between capital gains and ordinary gains, which is not all that much. It is very useful when you're in a startup with valuations growing rapidly but stocks not yet publicly trading, which means that if you pay tax on vest you'll pay much more and won't have stocks to sell to cover for that, while the amounts you put at risk are relatively small. "Depending on what you need to explain, you can submit your electronic return without the supplemental information and subsequently mail a Form 8453 with the additional information.  This is helpful for form 8489, for example, where you need to list every transaction reported by your stock broker on a 1099-B.  See https://www.irs.gov/pub/irs-pdf/f8453.pdf for more details on this form. If the information you need to submit an attachment for doesn't follow one of the options on that form, you will likely need to file a paper return or use a paid tax preparation service/application. Limitations of FreeFile are explained here, along with a list of forms that are available: https://www.irs.gov/uac/List-of-Available-Free-File-Fillable-Forms The ""Attaching Statements"" and ""Write-in information"" sections seem like they might apply to your situation. Attaching Statements - If you need to add statements and you can't use Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, to mail that information, you will not be able to use this program to efile your return Identity Protection PIN's (IP PIN) - This program only supports the entry of a Primary taxpayer's IP PIN. If the spouse or dependents have an IP PIN, you cannot use this program to efile the return. Writing In Information - Your ability to ""write in"" additional information to explain an entry is generally limited to the 1040 forms and some of the more frequently submitted forms. If you need to write in additional information on a form, other than the 1040 series, you may not be able to use this program to efile your tax return. E-filing Forms - To efile forms, (except Form 4868) they must be attached to a 1040 series form (1040, 1040A or 1040EZ). Form Limitations - There may be Known Limitations of forms you plan to complete. Please review them. A form limitation may keep you from completing or e-filing your return." "I'm assuming that by saying ""I'm a US resident now"" you're referring to the residency determination for tax purposes. Should I file a return in the US even though there is no income here ? Yes. US taxes its residents for tax purposes (which is not the same as residents for immigration or other purposes) on worldwide income. If yes, do I get credits for the taxes I paid in India. What form   would I need to submit for the same ? I am assuming this form has to   be issued by IT Dept in India or the employer in India ? The IRS doesn't require you to submit your Indian tax return with your US tax return, however they may ask for it later if your US tax return comes under examination. Generally, you claim foreign tax credits using form 1116 attached to your tax return. Specifically for India there may also be some clause in the Indo-US tax treaty that might be relevant to you. Treaty claims are made using form 8833 attached to your tax return, and I suggest having a professional (EA/CPA licensed in your State) prepare such a return. Although no stock transactions were done last year, should I still   declare the value of total stocks I own ? If so what is an approx. tax   rate or the maximum tax rate. Yes, this is done using form 8938 attached to your tax return and also form 114 (FBAR) filed separately with FinCEN. Pay attention: the forms are very similar with regard to the information you provide on them, but they go to different agencies and have different filing requirements and penalties for non-compliance. As to tax rates - that depends on the types of stocks and how you decide to  treat them. Generally, the tax rate for PFIC is very high, so that if any of your stocks are classified as PFIC - you'd better talk to a professional tax adviser (EA/CPA licensed in your State) about how to deal with them. Non-PFIC stocks are dealt with the same as if they were in the US, unless you match certain criteria described in the instructions to form 5471 (then a different set of rules apply, talk to a licensed tax adviser). I will be transferring most of my stock to my father this year, will   this need to be declared ? Yes, using form 709. Gift tax may be due. Talk to a licensed tax adviser (EA/CPA licensed in your State). I have an apartment in India this year, will this need to be declared   or only when I sell the same later on ? If there's no income from it - then no (assuming you own it directly in your own name, for indirect ownership - yes, you do), but when you sell you will have to declare the sale and pay tax on the gains. Again, treaty may come into play, talk to a tax adviser. Also, be aware of Section 121 exclusion which may make it more beneficial for you to sell earlier." In the question you cited, I assumed immediate exercise, that is why you understood that I was talking about 30 days after grant. I actually mentioned that assumption in the answer. Sec. 83(b) doesn't apply to options, because options are not assets per se. It only applies to restricted stocks. So the 30 days start counting from the time you get the restricted stock, which is when you early-exercise. As to the AMT, the ISO spread will be considered AMT income in the year of the exercise, if you file the 83(b). For NQSO it is ordinary income. That's the whole point of the election. You can find more detailed explanation on this website. "You are not the only one with this problem. When Intuit changed their pricing and services structure in 2015 a lot of people got angry, facing larger fees and having to go through an annoying upgrade just to get the same functionality (such as Schedule D, capital gains). You have several options: (1) Forget Turbo Tax and just use paper forms. That is what I do. Paper is reliable. (2) Use forms mode in Turbo Tax. Of course, that may be even more complicated than simply filing out paper forms. (3) Use a different service. If your income is below $64,000 the IRS has a free electronic filing service. Other online vendors have full taxes services for less than Turbo Tax. (4) Add the amount to ordinary income. Technically, as long as you report the income, you cannot be penalized, so if you add the capital gain to your ordinary income, then you have paid taxes on the income. Even if they send you a letter, you can send an answer that you added it to ordinary income and that will satisfy them. Of course you pay a higher rate on your $26 if you do that. (5) If you are in the 15% or below income bracket you are exempt from capital gains, and you can omit it. Don't believe the nervous Nellies who say the IRS will burn your house down if you don't report $26 in capital gains. Penalties are assessed on the percentage of TAXES you did not pay (0.5% penalty per month). Since 0.5% of $0 is $0 your penalty is $0. The IRS knows this. The IRS does not send out assessment letters for $0. (6) Even if you are above the 15% bracket, there is likelihood it is still a no-tax situation (see 5 above). (7) Worst case scenario: you are making a million dollars per year and you omit your $26 capital gains from your return. The IRS will send you an assessment letter for about $10. You can then send them a separate check or money order to pay it. In all honesty I have omitted documented tax items, like taxable interest, that the IRS knows about many times and never gotten an assessment letter. Once I made a serious math error on my return and they sent me an assessment letter, which I just paid, end of story. And that was for a lot more than $26. The technical verbiage for something like this in IRS lingo is CP-2000, underreported income. As you can see from this official IRS web page, basically what they do is guess how much they think you owe and send you a bill. Then you pay it. If you do so in time, you don't even get a 0.5% interest penalty on your $6.75 owed or whatever it is. (8) Go hog wild. As long as you are risking an assessment on your $26, why not go hog wild and just let the IRS compute all your taxes for you? Make a copy of your income statements, then mail them to the IRS with a letter that says, ""Hi, I am Mr. Odinson, my SSN is XXX-XX-XXXX. My address is XYZ. I am unable to compute my taxes due to a confused state of mind. I am hereby requesting a tax assessment for the 2016 tax year."" Make sure you sign and date the letter. In all probability they will compute the full assessment and send you a bill (or refund)." "I've bought ISO stock over they years -- in NYSE traded companies.  Every time I've done so, they've done what's called ""sell-to-cover"".  And the gubmint treats the difference between FMV and purchase price as if it's part of your salary.  And for me, they've sold some stock extra to pay estimated taxes. So, if I got this right...  20,000 shares at $3 costs you 60,000 to buy them.  In my sell-to-cover at 5 scenario: did I get that right?  Keeping only 4,000 shares out of 20,000 doesn't feel right.  Maybe because I've always sold at a much ratio between strike price and FMV. Note I made some assumptions:  first is that the company will sell some of the stock to pay the taxes for you.  Second is your marginal tax rate.  Before you do anything check these. Is there some reason to exercise immediately?  I'd wait, personally." "My tax preparing agent is suggesting that since the stock brokers in   India does not have any US state ITINS, it becomes complicated to file   that income along with US taxes Why? Nothing to do with each other. You need to have ITIN (or, SSN more likely, since you're on H1b). What brokers have have nothing to do with you. You must report these gains on your US tax return, and beware of the PFIC rules when you do it. He says, I can file those taxes separately in India. You file Indian tax return in India, but it has nothing to do with the US. You'll have to deal with the tax treaty/foreign tax credits to co-ordinate. How complicated is it to include Indian capital gains along with US   taxes? ""How complicated"" is really irrelevant. But in any case - there's no difference between Indian capital gains and American capital gains, unless PFIC/Trusts/Mutual funds are involved. Then it becomes complicated, but being complicated is not enough to not report it. If PIFC/Trusts/Mutual funds aren't involved, you just report this on Schedule D as usual. Did anybody face similar situation More or less every American living abroad. Also the financial years are different in India and US Irrelevant." "I don't think its a taxable event since no income has been constructively received (talking about the RSU shareholders here). I believe you're right with the IRC 1033, and the basis of the RSU is the basis of the original stock option (probably zero). Edit: see below. However, once the stock becomes vested - then it is a taxable event (not when the cash is received, but when the chance of forfeiture diminishes, even if the employee doesn't sell the stock), and is an ordinary income, not capital. That is my understanding of the situation, do not consider it as a tax advice in any way. I gave it a bit more though and I don't think IRC 1033 is relevant. You're not doing any exchange or conversion here, because you didn't have anything to convert to begin with, and don't have anything after the ""conversion"". Your ISO's are forfeited and no longer available, basically - you treat them as you've never had them. What happened is that you've received RSU's, and you treat them as a regular RSU grant, based on its vesting schedule. The tax consequences are exactly as I described in my original response: you recognize ordinary income on the vested stocks, as they vest. Your basis is zero (i.e.: the whole FMV of the stock at the time of vesting is your ordinary income). It should also be reflected in your W2 accordingly."