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- Apr 11, 2011
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I'm thinking I may have overpaid my taxes over the last few years, but I think I need some help from someone who knows more about the subject than I do, as well as some guidance on what to do next.
Several years ago, I started receiving non-qualified stock options from my employer, and a couple of years after they began vesting, I would occasionally exercise and sell some. The CPA we worked with at the time apparently didn't know how to deal with them, because she included a Schedule D with our return which showed the granted value as the basis, and then the higher sale price as well, meaning this form showed us with an additional gain. The result was a large increase in our reported income, even though the income from the sale of the options (and the resulting taxes withheld) was already included on the W-2. She justified it by telling us stock option sales made us subject to the Alternative Minimum Tax, and that's just another way Uncle Sam sticks it to the taxpayer, which is why we've been cursing the AMT since then, what with it causing us to pay double taxes on part of our income.
A couple of years after that, we began doing our own tax returns, but used her method as a model. However, this year I finally came to my senses and realized that using this method couldn't possibly be correct, did some research, and learned that the Schedule D should not show any gain for NQ options (and probably will show a slight loss after the broker commission). By the way, I'm sure the options in question were non-qualified, and it appears our CPA was treating them as incentive stock options. Obviously, this resulted in a much friendlier return for me this year (and I'm confident it's correct), but my question is about those previous returns. In particular, can I file amended returns with corrected Schedule D forms and get back what I overpaid? If so, how do I do this, and does it plant red flags for me to be audited? I've never gone through an audit, and the way I understand it, if the return is correct, then there's nothing to be worried about, but I'd just like to have an idea of what hassles would be ahead if I were to head down that path.
Several years ago, I started receiving non-qualified stock options from my employer, and a couple of years after they began vesting, I would occasionally exercise and sell some. The CPA we worked with at the time apparently didn't know how to deal with them, because she included a Schedule D with our return which showed the granted value as the basis, and then the higher sale price as well, meaning this form showed us with an additional gain. The result was a large increase in our reported income, even though the income from the sale of the options (and the resulting taxes withheld) was already included on the W-2. She justified it by telling us stock option sales made us subject to the Alternative Minimum Tax, and that's just another way Uncle Sam sticks it to the taxpayer, which is why we've been cursing the AMT since then, what with it causing us to pay double taxes on part of our income.
A couple of years after that, we began doing our own tax returns, but used her method as a model. However, this year I finally came to my senses and realized that using this method couldn't possibly be correct, did some research, and learned that the Schedule D should not show any gain for NQ options (and probably will show a slight loss after the broker commission). By the way, I'm sure the options in question were non-qualified, and it appears our CPA was treating them as incentive stock options. Obviously, this resulted in a much friendlier return for me this year (and I'm confident it's correct), but my question is about those previous returns. In particular, can I file amended returns with corrected Schedule D forms and get back what I overpaid? If so, how do I do this, and does it plant red flags for me to be audited? I've never gone through an audit, and the way I understand it, if the return is correct, then there's nothing to be worried about, but I'd just like to have an idea of what hassles would be ahead if I were to head down that path.