We all have heard and know of people becoming millionaires overnight with “stock option” money, especially in Silicon Valley. Stock options are an important part of the compensation package for many employees in the technology sector. For companies, it is a tool to retain employees and motivate them to perform better as the company’s growth and success translates to their success.
The most common types of stock options are Incentive Stock Options (ISO’s) and Non-Qualified Stock Options (NQSO’s). The tax consequences to employees are as follows:
Incentive Stock Options (ISO) (more…)
It is very common for U.S. parent companies to include key non-resident alien employees of their foreign subsidiaries in their stock option plans. What happens when the non-resident exercises the options or sells the options? Is the non-resident subject to withholding tax? Is there a U.S. tax filing requirement?
As a company, you intended the stock options you provide to be a benefit not a burden to your employees. For the employee to obtain the maximum benefit from the options, they have to be able to exercise the shares. However, the tax implications of the exercising ISO (Incentive Stock Option) shares can have costly consequences for your employees. Here are some tax implication scenarios that can transform ISOs from benefit to burden…