Subject: Stock Grant Plan
Date: Thu, 15 Jan 2004
Our company gives employees stock grants as an incentive compensation. Employees pay no cash for the stock received. The stock is vested at a cumulative 5% each year. When the employee leaves the company, he/she needs to sell the stock back to the company. What is the tax treatment for this stock? Is this a non-qualified plan? Will the employee be taxed on FICA, FIT, FUTA, SUTA, and SIT? Please help. Thanks.
Date: Mon, 02 Feb 2004
The stock grant results in ordinary (wages) income to the
employees. The income is computed as the stock grant vests based
on the fair market value on the vesting dates, unless the
employee elects under Internal Revenue Code Section 83(b) within
30 days of receiving the grant to have the transaction considered
completed on the date of grant, in which case all of the income
will be taxable on that date. The income is subject to income
and payroll taxes. Your employer should have given you
information about these consequences.
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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised
that any written tax advice contained in this answer was
not written or intended to be used (and cannot be used) by any
taxpayer for the purpose of avoiding penalties that may be
imposed under the U.S. Internal Revenue Code.