Employees paid in stock: the tax on RSU vests, option exercises and share sales, figured before you act
Free tax review
Find out what we’d handle and what it costs
Thirty minutes by phone; you leave with one written price.
We figure the tax on your RSU vests, option exercises and share sales, federal and state, before you act, then prepare the return that reports them. The first review is free, any planning is one flat fee quoted in writing before work starts, and individual returns start at $350. Based in Santa Clarita, we work with employees paid in stock in any state.
Typical situations
Do you work with people paid in RSUs and stock options like me?
Yes, we take on these kinds of stock pay: RSUs that vest on a schedule, incentive and nonqualified stock options, ESPP shares, restricted stock at a startup, and grants that were still vesting when someone moved into or out of California. An RSU is a restricted stock unit — a promise of company shares that are delivered when they vest; vesting is when the shares become yours.
RSUs vesting every quarter, with some shares sold
An employee whose RSUs vest every quarter and who sold some of the shares during the year has the W-2, the vesting schedule from the plan administrator’s portal, and the broker’s 1099-B — its report of each sale — with its supplemental statement. If the 1099-B basis — the amount a gain is measured from — leaves out the vest income and the return is filed as printed, income the W-2 already taxed is taxed a second time. We check each lot against its vest and, where the basis leaves out the vest income, report the correct basis on Form 8949, where sales go on the return. Individual returns from $350: how we prepare the return.
Weighing an ISO exercise before December 31
An employee at a startup weighing whether to exercise incentive stock options — ISOs — before December 31 has the grant notice with the exercise price, the per-share value the company provides, and later the Form 3921, the company’s record of an ISO exercise. Exercising means buying the shares at the price the grant set. If the shares are kept past December 31, their value above the exercise price can count for the alternative minimum tax — a separate tax figured alongside the regular one — in the year the shares are vested or transferable. That can happen with nothing sold and no income for the regular tax. We put a tax figure on each path the employee is weighing — exercise this year or next, sell in the same year or keep the shares — federal and state.
ISO shares sold soon after exercising
An employee who sold ISO shares before both holding periods were met (within 2 years of the grant or within 1 year after the shares were transferred, which the rules call a disqualifying disposition) has the Form 3921 and the 1099-B. The spread at exercise — the shares’ value on the exercise date minus the exercise price — or the gain if it’s smaller, becomes wages reported on the W-2, and no income tax is required to be withheld on it, so the year can end with a balance due. We figure the wage part from the Form 3921 and the sale, check that the W-2 shows it, correct the basis where it leaves that wage income out, and flag any shortfall before the year ends.
ESPP shares bought through payroll and sold
An employee who buys company shares through payroll deductions in an ESPP — an employee stock purchase plan — and sells some of them has the Form 3922, the company’s record of the purchase, and the 1099-B. Part of any gain can be wages, and the 1099-B basis can leave that part out. Which part is wages depends on whether the shares were held 2 years from the grant and 1 year from the purchase. We split each sale between wages and capital gain from the Form 3922 and, where the 1099-B leaves the wage part out of the basis, add it on Form 8949.
Restricted stock at a startup, with an 83(b) deadline
An employee who received shares that vest over several years, or bought option shares before they vested, has the stock grant or purchase agreement and the date the shares were transferred. An 83(b) election taxes the shares when received instead of when they vest, and it has to be mailed within 30 days of the transfer on Form 15620 — the IRS form for making it — or a written statement. Miss the 30 days and the shares are taxed at each vest instead. We read the agreement for the dates and the price only and figure the tax both ways; the employee decides and files it.
A move between states while grants were vesting
An employee who moved to another state, or to California, while grants were still vesting has the grant and vesting schedule, the move date, and a calendar or travel record of where the work was done. The same vest can show up on two states’ returns, and without the dates and the workdays the split can’t be checked. We count the workdays from the employee’s own records and prepare the returns for both states. For the move itself: how the state you left decides whether you really moved.
Stock sales
Why can the broker’s 1099-B tax vested stock income a second time?
The broker’s Form 1099-B can tax vested stock income a second time because, for stock pay granted after 2013, the basis it reports can leave out the income your W-2 already taxed at the vest or exercise. Filed as printed, that income is taxed twice.
RSUs are taxed through your W-2 when the shares vest, and exercising an NSO — a nonqualified stock option, which the IRS calls nonstatutory — makes the spread wages, reported in box 12 of the W-2 with code V. The income already taxed is part of the shares’ basis, but the broker isn’t allowed to add it to the basis it reports — so we check it lot by lot.
We match every lot on the 1099-B to the W-2 income at vest or exercise, or to the Form 3921 or 3922 behind it, and, where a lot’s basis is short, report the correct basis on Form 8949.
Incentive stock options
How does the alternative minimum tax treat an ISO exercise?
Exercising incentive stock options isn’t income for the regular tax, but the spread counts for the alternative minimum tax in the year your rights in the shares become transferable or vested, unless you sell the shares in the same calendar year.
We check:
- Form 6251, the federal AMT form, run before an exercise you’re weighing, or after it from the Form 3921 the company sends
- The Form 3921 dates against the two holding periods: 2 years from the grant and 1 year from the day the shares were transferred
- The two limits that can turn part of a grant labeled ISO into an NSO: an exercise more than 3 months after you leave the company, and ISOs worth more than $100,000 at grant that first become exercisable in the same year
- The AMT basis and any credit carried to a later year on Form 8801, the prior-year AMT credit form
What you get
What do I get from the planning review and the return?
From the planning review you get your grants and what’s already been taxed confirmed, this year’s tax figures for each vest, exercise and sale, and a withholding check; after it, we prepare the return or hand the figures to your own preparer.
What you hold, confirmed
The award types, the grant and vesting dates, and what has already been taxed — so the planning and the return start from the same facts.
The figures for this year
The income from vests and exercises, the basis for each sale, and the AMT check if ISOs were exercised, federal and state — the actual numbers, in order, with the reasoning written next to them. The 83(b) election’s tax on each path, and the workday split if you moved.
The withholding check
Your withholding set against the year’s projected tax, with the size of any gap and what would close it.
The return, or the figures
We prepare the year’s return from the same numbers, or hand the figures to your own preparer if you have one.
If there’s nothing here worth paying us for, we’ll say so on the call.
What we check
What do you check before anything is filed?
Before anything is filed, we check the documents your stock pay produced against each other: the W-2, the broker’s 1099-B and its supplemental statement, Forms 3921 and 3922, the plan administrator’s grant and vesting summary, the grant agreement, any 83(b) election, last year’s return, and the move dates and workday record after a move.
- 1099-B lots and the supplemental statement against each vest or exercise date and the W-2 income
- The W-2, including box 12 code V for NSO income, against the Forms 3921 and 3922
- Form 3921 dates against the ISO holding periods
- Form 3922 against each ESPP sale, to split wages from gain
- The plan administrator’s grant and vesting summary against the grant agreement’s dates and prices
- Any 83(b) election already filed against the transfer date
- Last year’s return for sales filed with the basis as printed
- Move dates and the workday record against each grant-to-vest period
California
What’s different in California for stock pay?
In California, three things are different: the state runs its own AMT, it taxes stock pay earned while working in California even after a move, and it gives capital gains no lower rate.
- California follows the federal stock option rules and has its own AMT, figured on Schedule P (540), California’s AMT schedule, where an ISO exercise counts the same way it does on Form 6251 unless the shares are sold in the same year; a credit for prior-year California AMT (FTB 3510) may be available. We run an ISO exercise through both AMTs.
- If you leave California before a vest or exercise, it still taxes the part of that stock pay earned while you worked there. Its guidance describes one reasonable way to split it: by California workdays between the grant date and the vesting date (RSUs) or the exercise date (NSOs), and we count the workdays from your records. If you’re a California resident on the vest or exercise date, it taxes all of it, so we check where you lived on the vest and sale dates. A later gain on selling the shares follows where you live when you sell, and when two states tax the same pay, a credit may be allowed so the same income isn’t taxed twice, and we claim it on whichever return it belongs to.
- Holding shares more than 1 year can lower the federal tax on a gain but not the California tax, because California has no lower capital-gains rate; we figure a planned sale for both returns.
Pricing
What does tax help for stock pay cost in 2026?
The first review is $0, individual returns are from $350, self-employed returns from $650 for a year that also has a side business or one rental, and business returns from $850 with the owner’s personal return included. Any planning after the free review, and each return, is a flat fee quoted in writing before we start.
What moves a quote: which kinds of stock pay there are (RSUs, NSOs, ISOs, ESPP shares, restricted stock) and how many grants; how many sales the 1099-B shows; whether ISOs were exercised and the shares kept past December 31; whether there was a move into or out of California, or work in another state, between grant and vest or exercise; whether earlier returns were filed with the 1099-B basis as printed; and whether there is also a side business or a rental. The quote is the price.
Planning review
$0 first review
- Planning after it, only if the work is worth paying for
- The year’s vests, exercises and sales lined up with their tax figures
Individual return
from $350
- Federal and state returns e-filed together; another state’s return priced into the quote
- A W-2 household with a brokerage account — stock sales checked for basis
Self-employed or with a rental
from $650
- One side business’s Schedule C or one rental’s Schedule E on the same return as the vest income and the 1099-B sales
- Estimated payments figured from your actual numbers
An AMT projection, an ISO exercise run through the AMT, a multi-state allocation, another state’s return, Form 8949 basis corrections and an 83(b) comparison are priced into the one quote you get on the call, not billed as add-ons later.
How it works
What happens after the free call?
The engagement letter goes out during the free 30-minute call; once you sign, a short onboarding call comes next, and the secure-portal invite and a short document checklist follow from it.
The 30-minute call
Six to eight questions: which kinds of stock pay you have and how many grants, how many sales the 1099-B shows, whether you exercised ISOs and kept the shares, whether you moved between grant and vest, and whether a side business or rental is in the year. It ends with one flat price for the work we’d take on.
The engagement letter
Sent during the call; signing it books the onboarding call.
Your documents
The portal invite comes with a short checklist: your W-2s, the broker’s 1099-B with its supplemental statement, any Form 3921 or 3922, the plan administrator’s grant and vesting summary, the grant agreement and any 83(b) election, last year’s return, and your move dates and workday record if you moved.
The planning review
We line up the grants, vests, exercises and planned sales by year and give each choice you’re weighing its tax number — sell this year or next, exercise now or later, file the 83(b) or not — federal and state. We run the AMT check on ISOs, weigh the year’s withholding against the projected tax, and tally workdays if you moved. You place any exercise or sale yourself through your own broker or plan administrator.
The return
Half the return fee starts the work, and the balance is due before e-file. You see the return before it’s filed.
Communication
You’ll know where the planning and the return stand.
The person who answers the phone is on the same team that figures the tax on your stock pay and prepares your return.
The same-day rule
Call or email during business hours and you’ll hear back the same day — all twelve months.
Planning, the return, or both
Tell us your next vest or exercise date on the call; we’ll say whether the year needs a planning review before it or only the return after it.
Admitted to practice before the IRS
Our team of IRS representation specialists is admitted to practice before the IRS. If an IRS letter shows up about a stock sale or a vest, forward it: how we handle IRS letters.
The N&T Tax & Advisory Group team
For an employee paid in stock, we figure the tax before the vest, the exercise or the sale, and we prepare the return after it.
Tax planning · Tax preparation · IRS representation · Direct line: (661) 554-4495
Reviews
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Where we work
Do you work with employees paid in stock outside California?
Yes, we work with employees paid in stock in every state, remotely by phone and screen share. Your 1099-B and its supplemental statement, Forms 3921 and 3922 and the vesting summary come through the secure portal, and we walk through the figures by phone or video. If you live in another state, we prepare that state’s return too and price it into your quote. In person, we work in the Santa Clarita Valley.
What we don’t do
We don’t tell anyone what or when to exercise, hold or sell — that is investment advice — and we don’t value private company stock; we use the value the company or broker reports. We don’t file an 83(b) election for you — we explain the 30-day rule and figure the tax both ways, and you file it — and brokerage, trading, plan administration, and investment, financial and legal advice are outside our work.
Worth reading
What can you read before you call?
Posts from our blog on two moments that come with stock pay: a big vest year and a move between states.
FAQ
RSU and stock option tax questions
Are RSUs taxed when they vest or when I sell the shares?
The vest is taxed as pay; a sale is taxed only on the change in value since the vest. RSUs generally aren’t taxed when they’re granted; when they vest, the value of the shares delivered is wages on your W-2. The income already taxed is the shares’ basis, and held more than 1 year, any gain is long-term. We match each sale to its vest and the W-2 before the return is filed.
Do I pay tax when I exercise incentive stock options?
Not for the regular tax — an ISO isn’t taxed when it’s granted or when you exercise it. For the alternative minimum tax, the spread counts once the shares are vested or transferable, unless they’re sold the same year; whether AMT is owed depends on the whole return. If you’re weighing an exercise, we run it through Form 6251, the federal AMT form, so you know the figure before you decide.
How are ESPP shares taxed when I sell them?
Buying the shares isn’t taxed at all — the tax comes at the sale. Part of any gain can be wages and the rest capital gain or loss, and which part is which depends on whether the shares were held 2 years from the grant date and 1 year from the purchase. Form 3922 carries the dates and prices needed to split it, and we use it with the 1099-B to report each sale correctly.
Will the tax withheld from my vests cover what I owe?
Not always — it depends on everything the year produced, weighed against what was withheld from vests and paychecks. Income with no withholding requirement, such as ISO shares sold early, can widen the gap. If there’s a gap, we tell you the size of it and the ways to close it — an estimated payment or a change to your withholding at work — before the year ends.
Does California still tax my RSUs after I move out of the state?
It can. California taxes the share of a vest you earned while working in the state, even after you leave, and its guidance counts California workdays between the grant and the vest — one reasonable method it describes — to make the split. What you’re taxed on after leaving also turns on where you lived when the shares vested and when you sell them, and when two states tax the same pay a credit may be allowed. We check residency, work out the split from your own records, and prepare both states’ returns.
Can you tell me whether to exercise, hold or sell?
No — that decision is yours, and we don’t make it. We’ll figure the tax on the choice you make, or on each option you’re comparing; you act through your own broker or plan administrator, and we don’t move money, sell investments or manage the account. If the grant agreement needs a legal read, we’ll tell you to take that part to an attorney.
Want to know the tax before you exercise or sell?
One free 30-minute call. You’ll leave knowing what we’d handle and what it costs — whether or not you hire us.
Rather talk now? Call (661) 554-4495 — reach us during business hours and you’ll hear back the same day.
Our team of IRS representation specialists is admitted to practice before the IRS. This page is general information, not tax advice for your specific situation.