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Alert: Tax & Year-End Strategies, Negotiating Pay, Tax Changes (October 20, 2009)

October 20, 2009 - myStockOptions.com is updated as needed every business day for legal, regulatory, or tax-related changes that affect equity compensation and planning. Highlights of the past few months include:

  • strategies for stock compensation in the current market environment
  • tips for negotiating equity compensation packages
  • year-end planning for stock grants, including restricted stock and RSUs
  • the impact of the past year's economic malaise on corporate stock grant practices, and responses to underwater options
  • updates in the Global Tax Guide, including a proposed major overhaul in the taxation of equity awards in Australia, plus changes in China

Click here to see a list of the major additions and revisions to our content during the third quarter of 2009.

Year-End Planning: Another Season Approaches

The season for year-end planning is just around the corner. The year-end section of our award-winning content has been updated for market conditions in 2009, tax changes, and the prospects for higher rates ahead. Some planning ideas apply every year, but others may be affected by current circumstances. For the latest on these topics, see Financial Planning: Year-End Planning.

Negotiating Pay Packages

Shaky stock markets provide ideal circumstances for negotiating a larger stake of equity compensation as part of your pay package. A new article by Chris Murphy explores possibilities you may want to consider if this opportunity arises. It joins earlier articles on similar topics by Alisa Baker, also in the section Job Search & Negotiation.

Social Security Maximum Taxable Earnings Unchanged For 2010: No Tax Increase

Given the minimal inflation this year, the Social Security Administration has announced that the maximum wage base for calculating Social Security tax (6.2%) will be unchanged for 2010 at $106,800 ($6,621.60 in tax). The Medicare part of FICA is uncapped at 1.45%. These taxes apply to all stock grants, except for ISOs and tax-qualified ESPPs.

Tax Increase In California

With effect from November 1, 2009, the California state withholding rate on supplemental income from cash bonuses, exercises of nonqualified stock options, and restricted stock vesting will rise to 10.23% (up from 9.3%). Any transactions starting on this date will have a higher California withholding rate, which may not match your actual effective tax rate.

Low Company Stock Price Can Help Restricted Stock Tax Planning

As explained in a new FAQ, a special election under the tax code can help you make the best of a low company stock price. This election taxes the value of the award immediately at grant, when the stock price is low, instead of taxing the value at vesting, when your stock price and tax rate may be much higher. However, there are risks. Read the details in the section Restricted Stock: Taxes Advanced.

Cool New Tool!

We have developed a new tool to help you see the financial advantages of participating in a stock option exchange. It shows you the break-even point and appreciation needed for the value of the old option grant to at least equal the value of the new grant on the basis of your exchange ratio. For access to our break-even tool for underwater stock options, email support@mystockoptions.com for a special user name and password.