Note. On a Married Filing Joint return, be sure to correctly assign ownership of Form W-2 Wage and Tax Statement to the taxpayer or spouse.
Per IRS Publication 525 Taxable and Nontaxable Income, on page 12:
Tax form. If you have income from the exercise of nonstatutory stock options, your employer should report the amount to you inbox 12 of Form W-2 with code V. The employer should show the spread (that is, the FMV of stock over the exercise price of options granted to you for that stock) from your exercise of the nonstatutory stock options. Your employer should include this amount in boxes 1, 3 (up to the social security wage base), and 5. Your employer should include this amount in box 14 if it's a railroad employer.
If you're a nonemployee spouse and you exercise nonstatutory stock options you received incident to a divorce, the income is reported to you in box 3 of Form 1099-MISC.
Sale of the stock. There are no special income rules for the sale of stock acquired through the exercise of a nonstatutory stock option. Report the sale as explained in the Instructions for Schedule D (Form 1040) for the year of the sale. You may receive a Form 1099-B reporting the sales proceeds.
Your basis in the property you acquire under the option is the amount you pay for it plus any amount you included in income upon grant or exercise of the option.
Your holding period begins as of the date you acquired the option, if it had a readily determinable value, or as of the date you exercised or transferred the option if it had no readily determinable value.
For options granted on or after January 1,2014, the basis information reported to you on Form 1099-B won't reflect any amount you included in income upon grant or exercise of the option. For options granted before January 1,2014, any basis information reported to you on Form 1099-B may or may not reflect any amount you included in income upon grant or exercise; therefore, the basis may need to be adjusted.
CAUTION! It’s your responsibility to make any appropriate adjustments to the basis information reported on Form 1099-B by completing Form 8949.
To enter the Form 1099-B:
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.