Your Employee Stock Purchase Plan
STEP 2
STEP 3
Make tax season
less taxing.
STEP 4
STEP 5
STEP 6
TAX
Information to help you
determine your 2013
tax-reporting requirements
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
STEP 1
14
Your Employee Stock Purchase Plan
STEP 2
Step 1
1
STEP 3
STEP 4
STEP 5
STEP 6
Gather the following documents.
Form/data
Where to find it
Who to call
Form W-2 (or 1099-MISC if
you are a nonemployee)
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
Your ESPP
Transaction History
You would have received purchase confirmation
and statements from Fidelity at the time of your
original share purchases. The information that
you need will include the purchase dates, fair
market value, total shares purchased, and grant
dates. Information is also available online at
Fidelity NetBenefits®.
A Fidelity Stock Plan
Services Representative
at the number provided
on the statement
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
IRS Form 3922
Your employer will arrange to provide you with
a Form 3922 whenever you purchase employee
stock under a Section 423 qualified ESPP.
Your employer or Fidelity
Stock Plan Services
24
4
Your Employee Stock Purchase Plan
STEP 1
2
STEP 3
Step 2
STEP 4
STEP 5
STEP 6
Determine if you have a Qualified or
Disqualified Disposition
Your ESPP is qualified under Section 423 of the Internal Revenue Code and qualifies for special
capital gains tax treatment if you hold your shares for a certain period of time. The first step in
preparing your taxes is to determine whether the shares you sold should be treated as a “qualified
disposition” or “disqualified disposition.” You will need to do this in order to determine whether
you owe any ordinary income and to adjust your cost basis prior to calculating your capital gain or
loss when you prepare IRS Form 8949 and Schedule D.
Qualified Disposition:
Favorable capital gains tax treatment happens when two time periods are met. First, shares must
be sold two years or more from your plan’s grant date (or beginning of offering period).* Second,
the sale should happen more than one year after the purchase date of shares.
Disqualified Disposition:
This occurs when you sell your shares within the first two years of your plan’s grant date (or
beginning of offering period)* or one year from the purchase date.
*Sometimes this date is the same as your enrollment date and other times it is not. If you are unsure of the date, check your plan document or the
NetBenefits Web site for details.
What is the date shares were purchased and when did you sell those shares?
1/1/2011
Disqualified Disposition
Year 1
Qualified Disposition
Year 2
Purchase Date
Sold
2/1/2012
1/1/2013
For Example:
Grant date/Beginning of offering period: 1/1/2011
Date shares purchased for you: 2/1/2012
Date you sold these shares: 1/1/2013
{
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.
4
Grant Date/
Beginning of
Offering Period
34
Your Employee Stock Purchase Plan
STEP 1
STEP 2
STEP 4
Step 3
STEP 5
STEP 6
Report your ordinary income.
3
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 or you may receive a 1099-MISC if are a nonemployee of
the company. 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
12c
14 Other
C
o
d
e
12d
C
o
d
e
Your employer might also
use this area to report
additional compensation.
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
2013
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 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.
For illustrative purposes only.
4
ESPP income will usually be
included with your other
compensation in box 1.
44
Continues
Your Employee Stock Purchase Plan
STEP 1
3
STEP 2
Step 3
STEP 4
STEP 5
STEP 6
Report your ordinary income.
Your W-2 will more than likely aggregate all your income together, including ESPP amounts.
However, you may need to figure out what the ESPP amount was per lot sold, so you can
properly adjust your tax cost basis. You’ll use this information for Step 5, where you report any
capital gains or losses. If you don’t make this adjustment, you could end up being taxed twice
on this income.
The calculation depends on whether you had a qualified or disqualified disposition:
Qualified Disposition
Disqualified Disposition
The lesser of:
Ordinary Income =
iscount amount (at grant date
1. D
or offering period begin date) ×
number of shares sold
OR
(Fair Market Value at purchase –
Discounted purchase price) ×
number of shares sold
2. (Sale price – Purchase price) ×
number of shares sold
(Purchase price × number of shares sold) + Ordinary Income
4
Cost Basis =
54
Your Employee Stock Purchase Plan
STEP 1
4
STEP 2
STEP 3
Step 4
STEP 5
STEP 6
Assemble information on the
purchase and sale of your stock.
Your employer is required to provide you with Form 3922 whenever
you purchase employee stock under a Section 423 qualified ESPP.† You
should expect to receive Form 3922 in January of the year following
the purchase. Even if you don’t have a tax-reporting event in 2013,
you will still receive this form. Please save this Form 3922 as it contains
important tax information to help you file your taxes when you sell this
stock. Remember, when you sell stock acquired under an ESPP, you may
have taxable ordinary income to report in addition to any gains or losses
you may incur.
Note: This information is also available on NetBenefits.com. Go to
the ESPP link, then click Transaction History > View History Details.
For illustrative purposes only.
Actual form may vary based on
point of origin (your employer,
transfer agent, or third-party
service provider).
COLUMN
DESCRIPTION, AS IT APPLIES TO ESPP
1
Date option granted (grant date, offering period
begin date)
This is typically the first day of the offering period, but it may vary based on
plan documents.
2
Date option exercised (purchase date)
Shows the date you exercised the option to purchase the stock.
3
Fair market value per share on grant date (grant
date FMV, beginning FMV)
Also referred to as the grant date price, or the offering price, this is the fair market
value of the stock on the first day of the offering period.
4
Fair market value per share on exercise date
(purchase date FMV)
The market price needed for calculating ordinary income on disqualifying
dispositions, this is the fair market value of the stock on the purchase date.
5
Exercise price paid per share (purchase price)
This is the price paid for the ESPP shares, taking into account any look-back
and any discount (if applicable).
6
No. of shares transferred (total shares purchased)
This is the number of shares purchased.
7
Date legal title transferred (purchase date†)
This is the date the legal title of shares was first transferred to you.
8
Exercise price per share determined as if the
option were exercised on the date shown in box 1
The value of the discount applied to your FMV on the grant even if this was not
the price paid for the share.
For Fidelity-administered purchases.
†
64
4
Continues
Your Employee Stock Purchase Plan
STEP 1
4
STEP 2
STEP 3
Step 4
STEP 5
STEP 6
Assemble information on the
purchase and sale of your stock.
Refer to your Fidelity Brokerage 1099 Tax-Reporting Statement (also available on
Fidelity.com/taxforms) to determine:
1
— Date of Sale or Exchange
2
— Number of Shares Sold (Quantity Event)
3
— Cost or Other Basis Provided to IRS/Not Provided
4
— Proceeds (Gain/Loss [–])
Example: Fidelity Brokerage 1099-B Tax-Reporting Statement
1
FORM 1099-B*
2
3
4
2013 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
(This Label is a Substitute for Boxes 1c & 6)
(IRS Form 1099-B box numbers are shown below in bold type)
THETA INC, THT, XXXXXXXXX
Sale
03/15/2013
02/12/2013
Sale
03/15/2013
03/12/2013
Subtotals
TOTALS
2a Sales Price
3 Cost or
Other Basis (b)
Gain/Loss (-)
30,452.25
6,258.29
36,710.54
28,452.25
6250.25 (e)
34,702.50
2,000.00
8.04
36,710.54
Box A Short-Term Realized Gain
Box A Short-Term Realized Loss
Box A Wash Sale Loss Disallowed
34,702.50
153.259
22.223
of Stocks,
Bonds, etc. (a)
5 Wash Sale
Loss
Disallowed
4 Federal
Income Tax
Withheld
13
State
15 State
Tax
Withheld
2,008.04
For illustrative purposes only.
4
8 Description, 1d Stock or Other Symbol, CUSIP
1a Date of
1b Date of
1e Quantity
Action
Sale or
Acquisition
Sold
Exchange
74
Your Employee Stock Purchase Plan
STEP 1
5
STEP 2
STEP 3
STEP 4
STEP 6
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 or 1099-MISC, you still need to report
the sale of the stock on Form 8949 and carry over the amounts to Schedule D.‡
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 the 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.
Qualified dispositions are always considered long term; however, disqualified dispositions can be either
short term or long term depending on how long you held the shares before selling them.
2. Y
ou need to figure out the ordinary income amount that may have been included in your W-2 or
1099-MISC so you can adjust your cost basis on Form 8949, if necessary. Go back to Step 3 for help.
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.
‡
84
4
Continues
Your Employee Stock Purchase Plan
STEP 1
5
STEP 2
STEP 3
STEP 4
STEP 6
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
• The gross proceeds from
the sale
For illustrative purposes only.
94
4
Continues
Your Employee Stock Purchase Plan
STEP 1
5
STEP 2
STEP 3
STEP 4
STEP 6
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
• The gross proceeds from
the sale
For illustrative purposes only.
104
4
Your Employee Stock Purchase Plan
STEP 1
6
STEP 2
STEP 3
STEP 4
STEP 5
Step 6
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
For illustrative purposes only.
Example: Long-Term Gains or Losses
For illustrative purposes only.
Go back to the Fidelity 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
© 2014 FMR LLC. All rights reserved.
675404.1.0 1.901664.104SPS-ESPP-TAX-PDF-0214