Stock plan recap

Even though IRS postponed tax deadline to May 17th this year due to COVID-19 pandemic, it is time to prepare 2020 tax return. Employer stock plan is part of the tax return preparation, so I would like to recap different equity types to refresh memory. (Tax is once a year, my memory doesn't like this repeat cycle)

When working on stock plan related tax preparation, you need the following forms:
Employer: W-2, 3922, 3921
Broker: 1099-B, Stock Plan Transactions Supplement
IRS: 1040, 1040 Schedule D, 8949

ESPP - tax on sale date
To qualify for favorable tax treatment under Section 423, you must hold the stock for more than two years from the grant date and more than one year from the date of purchase. However, for the gain or loss on your sale to be taxed as long term, you only need to hold the stock for more than one year after purchase.

Non-qualified Stock Option (NQ) - tax on exercise date and sale date
Typically, for non-qualified stock options ordinary income is recognized at the time of exercise and a capital gain or loss is recognized at the time of sale. If you sell your exercised shares within one year of exercise, your capital gain or loss is considered short term. However, if you hold the exercised shares for more than a year before selling them, the gain or loss is considered long term and long-term capital gains may be taxed at a lower rate.

Incentive Stock Option (ISO) - tax on sale date, AMT on exercise date
For ISOs, ordinary income is not recognized until you sell the resulting shares. In general, selling stock in a disqualifying disposition will trigger ordinary (compensation) income. If the shares are held for more than one year from the exercise date and more than two years from the grant date, any gain will typically be taxed as long-term capital gains.

There are no taxes due when you receive an ISO grant, and while you generally do not have to pay taxes when you exercise your ISO to purchase company stock, you may have to include the difference between the stock’s fair market value at exercise and the exercise price in your alternative minimum tax (AMT) computation. The inclusion of this amount in your AMT computation may result in additional ordinary income tax in the year of exercise. If the AMT inclusion does not increase your tax liability, taxes are generally due when you sell your shares from an ISO exercise.

Restricted Stock Units (RSU) - tax on vest date and sale date
Your restricted or performance stock awards are considered ordinary (compensation) income to you and taxable in the year your grant vests and/or shares are delivered to you, unless there is a deferral feature. In the case of a Section 83(b) election, the holding period begins on the date when the stock is awarded, rather than the date when it vests or is released to you.

Below are education material for various equity types:
ESPP - https://content.etrade.com/etrade/optionslink/espptax.pdf
NQ - https://content.etrade.com/etrade/optionslink/oltaxexercise.pdf
ISO - https://content.etrade.com/etrade/optionslink/isotax.pdf
RSU - https://content.etrade.com/etrade/customer/invest/finalrestrictedstockfaqs.pdf