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Employers must report the income from a 2020 exercise of Non-qualified Stock Options in Box 12 of the 2020 Form W-2 using the code V. The compensation element is already included in Boxes 1, 3 (if applicable) and 5, but is also reported separately in Box 12 to clearly indicate the amount of compensation arising from
Incentive stock options, or ISOs, are options that are entitled to potentially favorable federal tax treatment. Stock options that are not ISOs are usually referred to as nonqualified stock options or NQOs.These do not qualify for special tax treatment.
Report this amount on Form 6251: Alternative Minimum Tax for the year you exercise the ISOs. When you sell the stock in a later year, you must report another adjustment on your Form 6251 for the year of sale.
An incentive stock option (ISO) is a corporate benefit that gives an employee the right to buy shares of company stock at a discounted price with the added benefit of possible tax breaks on the profit. The profit on qualified ISOs is usually taxed at the capital gains rate, not the higher rate for ordinary income.