Wells Fargo recommends contacting a tax advisor for detailed information and guidance regarding tax consequences relating to exercising your stock options. This general information refers to U.S. federal income tax filing only. You are responsible for determining what impact, if any, your stock option exercise may have on your state, local, or non-U.S. taxes.

Tax Consequences of Stock Options
The tax implications at the time of exercise vary depending on the type of stock option.

Of the two types of options, incentive stock options (ISOs) and non-qualified stock options (NQSOs or NQs), Wells Fargo currently grants NQSOs.

Tax Consequences of NQSOs
Generally, there are no tax consequences to you at the time your option is granted. When you exercise an NQSO, you will be taxed on the spread — the difference between the exercise price and the market value on the date of the exercise. The spread, or gain, is considered compensation, and tax withholding is due and payable at the time of exercise.

When you complete a same-day sale or sell-to-cover, as a current or former team member: 

• Gain is reported on a W-2 from Payroll and
• Sale proceeds are reported on a 1099-B from the broker, Wells Fargo Investments, LLC.

You are required to use the Form 1040 (long form) and Schedule D to complete your Federal Income Tax Return.

When you complete a buy and hold or stock swap, as a current or former team member: 

• Gain is reported on a W-2 from Payroll.

When you sell stock, sale proceeds are reported on a 1099-B from your broker, you are required to use the form 1040 (long form) and Schedule D to complete your Federal Income Tax Return and may be subject to capital gain or loss.

Tax Consequences of ISOs
Incentive stock options (ISOs), under the Internal Revenue Code, are afforded certain preferential tax treatment if the stock is purchased and held for the required period of time. If the shares of stock acquired upon the exercise of an ISO are held for at least one year from the exercise date and two years from the grant date, the disposition of the shares may qualify for the preferential tax treatment. The tax consequences associated with ISOs can be complex and may change. We strongly urge you to consult with a tax advisor for tax advice.

Wells Fargo does not withhold taxes upon the disqualifying disposition of an ISO.