I exercised nonqualified stock options in 2007. I still own the shares. Thanks to this group, I learned that the "benefit" from exercising should be reported as income. If I don't have a W-2, (I've contacted the company to no avail. I haven't worked for them for 9 years) do I just add that amount to my other W-2 income?
Since I'm using TurboTax, should I just create a w-2 with as much info about the company as possible?
No, I did some research and found that you do have to pay the employer's and employee's portion of FICA. Roughly, I calculate this to be between 9.1% and 15.3% additional tax. The lower rate applies if your existing other W2 income is already 97500.
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Non-employees
If you're not an employee of the company that granted the option, withholding won't apply when you exercise it. The income should be reported to you on Form 1099-MISC instead of Form W-2. Remember that this is compensation for services. In general this income will be subject to the self-employment tax as well as federal and state income tax.
So would report the income on Schedule C, pay the employer and employee part of SS, etc.
If you wrote the income only on line 7 (wages), then you would also fill out the form for paying the employee's portion of social security ane medicare (form 8919). But the FICA tax here is half of the above method.
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But talk to an accountant to see if you can get away with reporting the income on line 21 (Other Income). This way you don't have to pay the FICA tax. I don't think it's doable though.
No, that doesn't sound right. It wouldn't match what's in the IRS records.
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