Stock options tax tips

March 11, 2010

I am not a fan of stock options. As I've said before, my personal payday motto is "say it with cash."  

If I then want to invest in a company, be it the one I work for or another business, then I'll use some of my added income to do so. 

That said, stock options are still popular in some workplaces.

Cashing them in, though, can cause all sorts of tax headaches. That's just one more reason they're not my favorite form of compensation.

As tax lawyer Robert W. Wood notes in a recent Forbes column, most companies provide at least some general tax advice to employees when they award options, but it's often not enough.

So Wood put together a list of 10 things you should know about stock options or grants if they are part of your pay package.

Yep, looking at Wood's list — ISO, NSO, AMT, Internal Revenue Code section 83(b) election, the "dreaded" IRC Sec. 409A — of tax considerations, I'm even more committed to good old greenbacks as my payment method!

Related posts:

Want to tell your friends about this blog post? Click the Tweet This or Digg This buttons below or use the Share This icon to spread the word via e-mail, Facebook and other popular applications. Thanks!

Share:

The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

Latest Posts
New direct deposit rule delays tax refunds for 830,000 taxpayers

March 10, 2026

An executive order mandating Uncle Sam primarily make electronic financial transactions has caused tax refund…

Read More
Hello Tax Season 2026

Happy New Tax Year! Are you ready to file your 2025 tax return? I know, too early to ask. But Tax Day 2026 will be here before we realize it. The Internal Revenue Service deadline to file and pay any tax we owe is the regular April 15 date this year. It’s also Tax Day for most of the states that collect income taxes from their residents, which is most of the states! If that seems too far away right now, don’t worry. As is the case every tax season, the ol’ blog’s tips and other tax reminders should help all of us meet our state and federal responsibilities. Procrastinators also will want to keep an eye on the countdown clock just below. It tracks how much time we have until April’s Tax Day, just in case we put off our annual tax task until the absolutely final hours and decide we need to instead get an extension request into the IRS by that date. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

Credits/Deductions
Disasters
Family
Filing and Paying Taxes
Politics/Laws
Refunds
State Taxes
Tax Brackets/Inflation
Tax Tips
Comments
  • analiza techniczna
    15 years ago Reply

    As far as I know there are 2 kind of stock
    1.) ISOs (Incentive Stock Options)
    2.) NSOs (Non-Qualified Stock Options)
    Some employees receive both one. It completely depend on your plan.
    ISOs are taxed the most favorably. There would be no tax at the time they are exercised while when you sell your shares then you will have to pay tax depend on gain. On the other hand, In case of NSOs, you owe ordinary income tax.

  • Forex Trading
    16 years ago Reply

    As far as I know employees are often offered to choose between cash rewards and stocks – in very attractive prices, I guess the low prices of the stocks cover the taxes in case you would like to cash them. I will look in to the matter more deeply though- thank you very much for this information.

  • Roth & Company, P.C.
    16 years ago Reply

    Got options?

    Here are “Ten Tax Tips For Stock Options,” via Kay Bell….

Leave your comment