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!

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Comments
  • analiza techniczna
    15 years ago

    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

    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

    Got options?

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

Comments are closed.