Wednesday, April 13, 2011

Employee Stock Options

Pelican said...

I held options (granted several years back through an incentive plan, all vested) with a private company of which I was an employee. We were bought by another company in 2010; I was let go and my options were converted into stock certificates for the acquiring company. I sold some of this stock in 2010 and kept the rest. I have 1099B forms for the stocks I sold.

I'm confused on how to declare this for 2010 federal taxes. Do the certificates count as income worth the stock price on the day the certificates were issued, and then I declare a short term capital gain on the part that I sold? Does the fact that the options were granted several years ago make this a long term gain somehow? Thanks!

11 comments:

WebTaxOfficeUSA said...

Dear Visitor, thank for stopping on our blog.

You can use a simple rule of thump to calculate your gain or loss. The date you exercised your options is your date of purchase and the gain or loss (long term or short term) is calculated based on that date.

I hope this helps you calculate your gain or loss. Please feel free to submit any additional questions you may have.

Good luck,
Web Tax Office Team

Unknown said...

OK, that's simple, then these are short term gains, no matter how long I held the vested options.
As I was given stock certificates, does this count as income even if I do not sell them? In other words, I would declare as income the worth of the stock on they day the certificates were issued, and then declare a short term gain on the difference when I sell part of them?
Thanks!

Beth said...

Hello,

I have a question but could not figure out how to send the question other than via a comment.

I own a small e-commerce business (there is no brick-and-mortar store) run out of Hawaii. Hawaii does not have "sales tax" per se, but instead has a general excise tax. Up until today, all of my sales have coincidentally only been make to people within the state. When I make a sale to someone who lives outside of the state, I do not collect "sales tax" from them. Do I still need to pay the general excise tax to the state from my own pocket?

WebTaxOfficeUSA said...

Hi Beth, thank you for visiting our blog for your tax related questions. There is a simple answer for your question which is that you are responsible to collect the general excise tax and pay the to the state, if you do not collect it from your customers then you would have to pay it out of your own pocket.

Hope this explanation helps accomplish your goals.

Good luck,
Web Tax Office Team
http://webtaxoffice.com

Sofia Johnson said...
This comment has been removed by a blog administrator.
ffc said...

Hi,
My question is not about ESOs but about a possible W-2 issue. I am trying to follow the instructions on how to post to the blog but I can't see how to introduce a new question rather than commenting on an existing one.....

SO here it is. My wife lived and worked in TX all of last year for a company in MA. Her company had her MA address on file and used that for her tax status so her W-2 lists her state as MA, all of her income as MA source income and has withholdings in MA. She has to file a MA non-resident form to reclaim her withholdings but she is concerned that if her W-2 states all of her income as MA source income, she will not receive her withholdings back. Does she need a corrected W-2 or is there another way to file to inform MA that her income is not MA source income?

THANKS!

Tax & Business Consultant said...

Hi Joe, the answer to your question is simple. Your wife's employer should issue a corrected W-2. If you file a non resident tax return for MA, you will unnecessarily be paying MA taxes.

Hope this explanation helps.

Good luck,
Web Tax Office Team
http://webtaxoffice.com

ffc said...

Hi,
Just to clarify, what exactly needs to be corrected on her W-2? Is it that box 16 needs to be blank but the state would still say MA and the withholding amount would also remain the same?

What if her employer is unwilling to issue the corrected W-2 but would furnish a letter stating that she lived in TX in 2011? Would that be sufficient if attached it to her MA return and she used question 13 to indicate that she spent 0 days in MA earning income?

I appreciate your help!

Tax & Business Consultant said...

Hi Joe, the right way is to request the employer issue a corrected W-2. Based on my personal experience a letter from the employer may not be sufficient to avoid paying the taxes.
If the employer is unwilling, the basically you will have the following options
1) File the tax return as is
2) Force the employer to correct the W-2
3) If the employer is unwilling to co-operate then you can report them to the Department of Labor. This is an extreme situation.

Most employers are kind enough to rectify the errors and issue the corrected forms. You need to simply ask them.

Good luck,
Web Tax Office Team
http://webtaxoffice.com

ffc said...

Thanks again, my wife did ask for the corrected return and was told "no" but that may have been because the HR/AP person she approached is very inexperienced and initially my wife thought she needed the state to be changed to TX.

So if the corrected W-2 is the way to go, what exactly needs to be changed?

If she can spell it out for them, maybe they will comply...

Again, my thanks for the information.

Tax & Business Consultant said...

Joe, I cannot give you exactly what to tell them as s to different approach need to be adapted to deal with different people.

All I can tell you is that you need to get the W-2 corrected, otherwise you will end up paying taxes for MA State when you did not even live in MA. If you need additional help you should hire a local accountant to help you resolve this matter. Hope we were able to help.

Good luck,
Web Tax Office Team
http://webtaxoffice.com