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Annotated diagram of Schedule DTax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.


Basics: Core Concepts


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Want to know more? Listen to our podcasts on the basics of stock options, restricted stock, and ESPPs.


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Restricted Stock 101: Five Essentials Of Restricted Stock & RSUs This is premium content

Matt Simon
While restricted stock and RSUs are relatively straightforward, they have technical aspects you must understand to make the most of them. Learn the essential facts of restricted stock and RSUs, including basic concepts, vesting schedules, and tax treatment.

Six ESPP Essentials (Part 1): Enrollment, Plan Type, Purchase Timing This is premium content

Matt Simon
An employee stock purchase plan can be a great benefit, but the rules and taxation are tricky. This two-part article presents six topics you must be familiar with to get the most from your ESPP. Part 1 covers enrollment, plan types, and offering/purchase periods.

Restricted Stock Units Made Simple (Part 1): Understanding The Core Concepts

Matt Simon
Restricted stock units (RSUs) have become the most popular alternative to stock options. While RSUs share many of the same issues as restricted stock, there are differences, and it is important to understand the basics of RSUs in their own right.

How To Avoid The Most Common Stock Option Mistakes (Part 1)

Beth Walker
Avoid the mistakes others made with options during past ups and downs in the stock markets. Situations where common errors tend to arise can be classed into nine categories, including option-term expiration, job termination, corporate mergers, financial planning, and various life events.

How To Avoid The Most Common Stock Option Mistakes (Part 2) This is premium content

Beth Walker
Avoid the mistakes others made during prior ups and downs in the stock markets. Common errors arise in nine different situations, including job termination, mergers, financial planning, term expiration, and various life events.

A Holistic Approach To Managing Equity Compensation This is premium content

Geoffrey M. Zimmerman
Podcast included! Planning for equity compensation begins with identifying the role stock grants will play in your life, whether for retirement, college funding, or other goals. This article offers points to consider for three different types of investors.

Five Major Developments In Equity Compensation Of The Past Decade: A Celebration Of Our 10th Anniversary

Matt Simon
TENTH ANNIVERSARY SPECIAL! We at myStockOptions.com have seen a lot of changes since we launched the website back in June 2000. As part of our 10th-anniversary celebrations, this article reviews the top five issues and developments in equity compensation we have witnessed and covered over the past decade. Let's take a break, look back, and have some fun.

Stock Option Terms: What You Can Expect This is premium content

Richard Friedman
UPDATES! Get a sense of what you should, and should not, expect in the terms of your stock option grant. A major survey of companies looks at trends in vesting schedules, post-termination exercise rules, and other plan features.

Stock Option Fundamentals (Part 1): Know Your Goals And Terms

Marilyn Renninger
Stock options aren't just for the folks on mahogany row any more. But turning stock options into the real green stuff takes some know-how. You need to know certain features of your grant to decide when to exercise your options and sell the stock.

How Does Your Company's Stock Plan Compare? (Part 1)

Kate Victory
UPDATES! How typical are your equity awards? Stock plan surveys let you compare the terms of your grants with the common practices of many companies. Part 1 focuses on types of equity award, reasons for making grants, vesting schedules, and option exercises.

How Does Your Company's Stock Plan Compare? (Part 2) This is premium content

Kate Victory
UPDATES! How typical are your grants of stock options or restricted stock/RSUs? Stock plan surveys let you compare the terms of your grants with the common practices of many companies. Part 2 focuses on grant guidelines, option expiration, job termination, and corporate changes of control.

What Are My Stock Options Worth? This is premium content

Richard Friedman
Your company just gave you a stock option grant, or your existing options are underwater. You wonder: "What are my stock options worth? Are they worth anything at all?" Learn about different valuation methods, including Black-Scholes.

Stockbrokers' Secrets: Stock Option Strategy (Part 1)

W.E.B. Bantling
My clients want to exercise options shortly after they vest for a significant purchase, like a fancy boat or a sports car. The most expensive boat or car I can imagine is the one bought with your just-vested options. Tips I tell clients include not exercising too soon or waiting too long.

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What is a stock option?

Generally, a stock option is a right that a corporation grants...

What is restricted stock? Does it differ from restricted securities?

Don't confuse restricted securities and restricted stock. They are very different...

What advantages do restricted stock and RSUs have over stock options? How do the two grant types compare?

Restricted stock always has some value to you even when the stock price drops below the price on the date of grant...

Why do companies shift from granting stock options to granting restricted stock units, and then sometimes back again to granting at least some stock options?

Surveys indicate that many companies use a variety of grants, including both stock options and restricted stock units (RSUs) in tandem. There are many possible reasons why a company might switch from options to RSUs...

What is an employee stock purchase plan?

An employee stock purchase plan (ESPP) is a type of stock plan that permits employees to use after-tax payroll deductions to acquire shares of their company's stock. Plans can have...

How does an ESPP differ from a stock option plan?

Employee stock purchase plans tend to be viewed as a benefit while stock options are a form of compensation. From an employee perspective, there are some differences in operations, eligibility, and design...

Are all stock options taxed the same?

No. The taxation of your stock options depends on whether they are...

What is the difference between restricted stock and performance shares or units? This is premium content

Shares of restricted stock are issued up front at grant, but you do not own them outright and cannot sell or transfer the shares until the time-based restrictions lapse. With standard restricted stock units the situation is basically similar, while with performance shares your company sets goals that must be met, such as...

What are stock appreciation rights?

SARs, or stock appreciation rights, are contractual rights that entitle you to receive the appreciation from a corresponding number of company shares after the grant date. Instead of exercising a stock option, you...

Do you have a chart that compares the tax treatment of stock options, restricted stock, RSUs, and ESPPs? This is premium content

The useful chart below gives the types of taxes, and when they are triggered, for various forms of equity compensation granted in the United States...

How do stock options, ESPPs, and restricted stock differ from the company stock fund or contribution offered under my 401(k) plan? This is premium content

401(k) plans are a type of broad-based, tax-qualified retirement plan funded by pre-tax contributions, unlike...

UPDATES! Why do companies grant stock options, restricted stock, and other equity awards?

A company may grant equity awards for a variety of reasons. Surveys show that...

UPDATES! How many people have or are eligible for stock options, restricted stock/RSUs, or ESPPs? This is premium content

The types and distribution of stock grants are changing, along with the patterns of eligibility. Data from research and surveys can give a sense of how prevalent equity awards are...

Are public resources available for doing research on a company's stock compensation practices, the grants it is making, and the holdings of its executives? This is premium content

At least for senior executives, you can find useful information. You can either go to the...

Can limited liability companies use stock options or make other stock grants? This is premium content

Limited liability companies (LLCs), which are somewhat similar to S corporations, have membership interests and not stock. Therefore, LLCs cannot offer stock options, restricted stock, direct rights to shares, or an employee stock purchase plan. However, they can give...

Can some types of companies not offer stock options or other forms of equity compensation to their employees?

Typically, only for-profit corporations are eligible to offer stock options and other stock grants...

Why doesn't my employer offer me equity compensation?

If your employer is a for-profit corporation, it probably can offer stock options, restricted stock, or other types of equity compensation to its employees. There may, however, be many reasons why your employer is not offering stock grants...

Are there any limitations on my company's discretion in granting stock options and/or restricted stock? This is premium content

Almost none, assuming the legal and other technical formalities are followed in creating...

Are stock options, restricted stock, and ESPPs subject to ERISA requirements and regulations? This is premium content

The Employee Retirement Income Security Act (ERISA), whose regulations on tax-qualified retirement plans include rules for employee benefit plans such as 401(k) plans...

Are stock plans affected by the Supreme Court's decision on same-sex marriage?

The ruling does affect stock plans. Among more than 1,000 federal laws and regulations impacted by the DOMA ruling are those which affect the design and administration of...

What is a stock plan?

A stock plan is a formal document that contains the general rules of operation that are common to all...

What are the important documents I need to understand a stock plan? What are some examples of plans? This is premium content

Carefully read and comprehend both the stock plan itself and other materials your company gives you or posts on a website. You should look at the following...

Are different types of stock options granted by employers?

Yes. The two main types are nonqualified stock options (NQSOs) and incentive stock options (ISOs). The names indicate their...

How common are stock options, restricted stock, performance shares, and ESPPs outside the US? Do surveys show trends? This is premium content

Consulting firms have studied the use of stock compensation in both developed and emerging economies. Stock options remain popular, but interest is growing in restricted stock/RSUs and performance shares. Among surveyed countries...

When did stock option expensing become mandatory? How does this affect and change my stock grants? This is premium content

Expensing became mandatory for calendar-year companies several years ago. Because companies take an earnings charge for the "fair value" of stock option grants on their income statements, companies have changed their grant practices by reducing the number of stock options, moving to grant more...

Am I entitled to voting rights or any stock dividends paid to shareholders before I exercise? This is premium content

No. Until you exercise a stock option, you do not have the rights of a...

Will I receive a copy of my company's annual report?

Under SEC Rule 428(b), your company is required to give you the...

What is a "nonqualified stock option"?

A nonqualified stock option, or NQSO, is a type of stock option that does not qualify for...

What is an "incentive stock option"?

An incentive stock option (ISO) is a type of stock option that qualifies for special tax treatment...

What are the different types of employee stock purchase plans? What are their features? This is premium content

In general, an ESPP fits into one of three categories: tax-qualified, not tax-qualified, or direct purchase...

How does a Section 423 ESPP work?

Employee stock purchase plans of this type are "qualified" under Section 423 of the Internal Revenue Code. When you enroll in the plan...

What is a vesting schedule?

A vesting schedule dictates when you may exercise your stock options or when the forfeiture restrictions lapse on restricted stock. Vesting is determined separately for each grant. A schedule is time-based if you must...

What are capital gains and capital losses? What are the capital gains tax rates?

Capital gain is income that arises from the sale of a capital asset. Gain from the sale of securities held for investment, such as shares acquired from stock compensation...

What methods may be used to exercise an option?

Check your company's stock plan for the allowed methods and procedures. The most common methods involve...

Other than paying the exercise price, what else must I do to exercise an option?

The specific steps vary among companies. You usually first need to make an irrevocable election to exercise...

When and how is the income at exercise taxed?

The tax treatment depends on the type of stock option. This website has detailed content about tax withholding and reporting in the Tax Center, which includes annotated examples.

What is the standard stock option term? Do options ever expire? This is premium content

You want to know the term of your grant to prevent valuable stock options from expiring. Most options are granted with a 10-year term, but some have a shorter life, such as...

Once my in-the-money options vest, are they mine forever? This is premium content

No. You could lose them in any of the following ways...

How does a compensatory stock option differ from a publicly traded stock option listed in a newspaper's business section? This is premium content

Publicly traded stock options (or "call options") listed in newspapers...

What is "common stock"? This is premium content

Common stock is the form of securities issued to the vast majority of owners of a business corporation, as in an option exercise or ESPP purchase...

What is "preferred stock"? This is premium content

Preferred stock is a class of equity securities of a corporation that is given greater rights than common stock...

I have little cash. Will I still be able to take advantage of my company's stock options? This is premium content

Many companies allow...

What is the SEC?

The SEC is, in full, the Securities and Exchange Commission. The SEC is the federal agency...

Do you have any suggestions for additional resources on stock options, equity pay, and employee ownership? This is premium content

The largest association devoted to stock-plan drafting, design, and administration...

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