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ESPPs: Taxes


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ESPP Taxation Made Simple This is premium content

Matt Simon
Your employee stock purchase plan may be one of the best benefits offered by your company. However, to appreciate the advantages of enrolling in the ESPP you must understand the tax consequences of participation. This article explains the tax basics.

Six ESPP Essentials (Part 2): Holding Periods, Tax Treatment, Major Corporate Or Personal Events This is premium content

Matt Simon
Your company's employee stock purchase plan (ESPP) can be a strong financial benefit, but the rules and taxation can be tricky. Part 2 delves into the complicated topics of holding periods, tax treatment, and the impact of various life events on your ESPP participation and holdings.

IRS Form 3922 For ESPPs: What You Need To Know, And How It Can Help You Understand ESPP Taxation This is premium content

Bruce Brumberg
Stock purchases made through an ESPP during a calendar year are reported to you and the IRS on Form 3922 early in the following year. This article explains what you need to know about the information on the form, and how the form can help you better understand the complexities of ESPP taxation.

Fundamentals Of Employee Stock Purchase Plans (Part 3): Tax Treatment Of Your Purchases And Sales This is premium content

Alisa Baker
Now let's look at the employee tax issues associated with employee stock purchase plans (ESPPs). ESPP tax rules can be more confusing and less logical than those that govern stock options.

ESPP Choices: Flip Or Hold? (Part 1) This is premium content

Timothy A. Farmer and Gregory G. Geisler
After you decide to participate in your company's employee stock purchase plan, your next decision is whether to sell the stock soon after purchase or to hold it (and for how long). This article series examines different ways to participate in your ESPP according to relative risk tolerance, timeframe, and needs for money.

Avoid Tax-Return Mistakes With Stock Options & ESPPs: What You Need To Know

Bruce Brumberg and Lynnette Khalfani
The 2014 tax-return season has the potential to be more confusing than most if you sold stock in 2013. Read this article for tips on reporting stock sales and on other crucial tax-return topics.

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What are the eventual tax consequences of participating in a tax-qualified employee stock purchase plan (ESPP)?

The rules of ESPP taxation are more confusing than those of stock options and restricted stock. You are not taxed when the shares are purchased: only at...

My company's ESPP is not tax-qualified under Internal Revenue Code Section 423. What is the tax treatment for a stock purchase and sale? This is premium content

"Not qualified" means that your company's ESPP does not meet the requirements under Section 423 of the Internal Revenue Code. Its mechanics and procedures may be the same as a tax-qualified ESPP, but the favorable tax treatment does not...

My ESPP has no discount apart from my company's elimination of any fees, such as the broker's commission. Is this taxable? This is premium content

The company's handling of any commission or other fees is not...

How long must I hold shares purchased under a Section 423 ESPP to receive favorable tax treatment?

To get favorable long-term capital gains treatment...

What do I need to know about the information on IRS Form 3922 for ESPPs? This is premium content

Your company is required to file Form 3922 with the IRS and either give you a copy or present the same information on a substitute document. The form contains information about your purchases in your company's tax-qualified ESPP during the prior tax year. With this reporting, the IRS now knows more information about your ESPP purchases than it did before, particularly with regard to your...

UPDATES! What tax statement will I receive from my broker after a sale of company stock I acquired by stock option exercise, restricted stock vesting, or ESPP purchase? This is premium content

You will need to gather certain information to complete your tax return. The broker will send you IRS Form 1099-B for the proceeds...

What is an ESPP disqualifying disposition, what can cause it, and why does my company care? This is premium content

A disqualifying disposition occurs when you sell or otherwise...

Do I have to pay tax when stock is purchased for me under the plan? This is premium content

If it's a Section 423 ESPP, no. Although you will acquire stock at a discount from its fair market value...

Are taxes withheld when shares are bought under a tax-qualified employee stock purchase plan? Do FICA taxes apply?

There is no withholding at purchase when shares are bought through a tax-qualified ESPP. However, when you sell the shares, income will be reported...

Are taxes withheld when shares are bought under an employee stock purchase plan that is not tax-qualified?

The full spread of any discount between the purchase price and the market price is...

Will my company withhold taxes at the sale of stock that I purchased under my employee stock purchase plan? This is premium content

In these situations most employers do not...

What is backup withholding? How do I prevent it or recover it? This is premium content

Backup withholding is a form of tax withholding on income from stock sales, along with interest income, dividends, or other types of payments that are reported on Form 1099. Your brokerage firm is required to make backup withholding if you are...

UPDATES! How does a non-US resident reclaim US backup withholding? This is premium content

If you are a nonresident alien and do not complete and file Form W-8BEN with the IRS upon receiving stock-sale proceeds, such as those stemming from equity awards, your brokerage firm will assess backup withholding on the proceeds. To reclaim backup withholding, take the following steps...

Does the alternative minimum tax (AMT) apply to the ESPP discount spread? This is premium content

In stock compensation, the AMT is a factor only with...

Are pre- or post-tax dollars used to purchase the stock in the ESPP? Is the salary used to purchase stock still included in my income? This is premium content

The amount withheld consists of...

Is transferring ESPP stock into a joint account with my spouse a disqualifying disposition if the stock has not met the holding-period requirements? This is premium content

No. Similarly, the transfer of share certificates into a brokerage account to be held in street name would not be a disposition...

In a divorce agreement, how is my ESPP treated? Is transferring to my former spouse ESPP stock that has not met the holding period a disqualifying disposition? This is premium content

ESPPs almost never allow the option/purchase rights to be transferred during...

Do the holding-period requirements apply to my ESPP stock after I leave the company? This is premium content

These tax rules do not depend on...

Can I use ESPP shares in a stock-swap exercise of my options? This is premium content

Yes, if your company allows it. When you use your ESPP shares as currency for exercising options, you receive both replacement shares equal to the number you exchanged and the profit shares...

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