Tax Center - ISO Withholding

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Stock Option Fundamentals (Part 3): Income Taxes And Withholding This is premium content

Here's some advice for financial fitness: take stock of taxes before you exercise! When and how you exercise your stock options can have a major impact on how much tax and which taxes you'll pay.

IRS Guide To Auditing Techniques For Stock-Based Compensation

The IRS tips its hand on what its agents look for in audits related to all types of stock pay to ensure compliance, whether by corporations or executives.

FAQs

What are the ISO withholding rules?

Unlike with NQSOs, there is no federal income tax withholding at...

W-2 diagram What will my W-2 show after I exercise incentive stock options? This is premium content

For an ISO exercise in which you hold the stock, nothing is...

What should I do if I don't receive a W-2 or if I lose it? This is premium content

Each company you worked for as an employee in the prior tax year should give you an IRS Form W-2, usually no later than January 31. If you have not received your W-2 by the middle of February...
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UPDATES! If I exercise ISOs and hold the stock (triggering AMT for the spread) or sell the stock in a disqualifying disposition, will I need to make estimated tax payments? This is premium content

You need to pay enough tax during the year through withholding or estimated tax payments to avoid penalties and interest. The tax that has to be paid includes any AMT attributable to the exercise of ISOs or any ordinary income from a disqualifying disposition. In these ISO situations, your employer does not...

Even though no withholding is required for ISOs, can I still pay the federal and state taxes when I make a cashless exercise? This is premium content

While some companies might permit this if asked, the IRS may not allow the practice. The situation is far from clear, as the tax code...

UPDATES! Are there any strategies for paying estimated taxes on income from stock options and restricted stock? This is premium content

Estimated-tax payments for the tax year are typically due on the 15th of April, June, and September and on January 15 of the following year. If you are paying estimated taxes, one strategy is that just after the start of an estimated-tax period you can...

Are my stock grants affected by the rules of deferred compensation under IRC Section 409A? This is premium content

A number of tax law provisions and interpretations that may affect your stock grants occur in...
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