Public Policy: Remove Taxes on Sharing Stock With Workers

Our federal tax system, the public policy, makes it unnecessarily difficult for private companies to share stock with their employees, contractors, advisors, and other service providers. The problem lies in our tax law. The Problem with Issuing Shares to Workers Why doesn’t your employer bonus your shares? Because the IRS treats any share bonus asContinue reading “Public Policy: Remove Taxes on Sharing Stock With Workers”

Incentive Stock Options: The Qualifications and Limitations

In startup land, aside from cash compensation, stock options are the most important part of employee compensation. (This is the case because once a startup is beyond the very early, initial startup phase, no other form of equity compensation–such as restricted stock or RSUs–works very well from a tax point of view for employees.) BecauseContinue reading “Incentive Stock Options: The Qualifications and Limitations”

ISOs: Annual Tax Reporting Requirement

If your company has had employees exercise incentive stock options (“ISOs”), you are required to report certain information to the IRS and the optionee about the exercise. ISO Tax Reporting There is no income or employment tax withholding required on the exercise of an ISO. But there is an annual tax reporting obligation to theContinue reading “ISOs: Annual Tax Reporting Requirement”

Immediately Exercisable ISOs: The Problems

A lot of companies, including a large portion of Silicon Valley startups, grant new hires immediately exercisable ISOs (incentive stock options) with the expectation that many will exercise their options “early” for favorable tax treatment. In fact, employees are often given a kit with all the paperwork, including everything needed to exercise and file anContinue reading “Immediately Exercisable ISOs: The Problems”

Incentive Stock Options: Post-Termination of Service Exercise Periods

The 90-day post termination of employment exercise period for stock options is under attack. A lot of companies are moving away from 90 days. You can find a list of them in a GitHub repo maintained by Zach Holman. Zach also has written an impassioned post about this issue. Why is the 90-day rule problematic? BecauseContinue reading “Incentive Stock Options: Post-Termination of Service Exercise Periods”