Year-end strategies for stock options and restricted stock
Roth IRA contributions and conversions affected by stock grants and year-end moves
Articles about year-end financial and tax planning
Survey shows stock comp remains popular worldwide
Self-study courses offer continuing education credits for CFPs and CEPs


Educating people about the financial, tax, and legal planning for stock compensation is at the heart of what we do here at We make these complex topics understandable to people who do not enjoy reading the Internal Revenue Code or the securities laws.

This is why we love December. In addition to holiday lights, this month sees the peak of year-end financial and tax planning. Our editorial team has been busily following tax-law developments in Congress so that our content offers up-to-the-minute insight and accuracy.

Below are two FAQs showing the depth of our coverage, plus a holiday sampler of our articles on year-end planning for stock grants. These include an exclusive feature compiling views from financial advisors, in their own words, on planning with stock grants, both for year-end 2009 and beyond. This article is available free with registration.

We appreciate your interest in If you do not yet subscribe to Premium or Pro Membership, giving full access to our content and tools, please contact us before December 31 to receive a $25 discount on a one-year subscription. We'd love to hear from you by phone (617-734-1979) or by email ( Thank you.

—Matt Simon, Editor & Content-Manager


Think Twice insider trading prevention videos: educate, entertain, and jolt your employees and executives (see and information below)

Find out why E*TRADE Corporate Services is the stock plan provider of choice for a quarter of the S&P 500 (see and information below)

AdvisorFind Directory from search this resource for financial, tax, and legal advisors with experience in stock compensation (see and information below)


Below are two frequently asked questions (FAQs) about year-end financial and tax planning. They are taken from the 750+ FAQs on All of these FAQs are available for your company to license or by Premium or Pro Membership. Please do not copy or excerpt this information without our permission.

What are some year-end strategies for stock options and restricted stock?

This depends on your financial situation, on whether your decisions should be entirely tax-driven, on what you did earlier in the year, on your outlook for your company's stock price, and on the prospects for changes in tax law during the year ahead. This FAQ presents 10 situations and strategies. Five of these are given in abridged form below. To read the full text, see the FAQ at

1. You are planning to sell the stock at exercise late this year or early next year. You should calculate whether the ordinary income at exercise will push you into a higher tax bracket, and what the taxes will be if the rate for that bracket goes up. To break up the tax hit, you may want to spread the same-day exercise/sale over the end of this year and the beginning of next year.

By contrast, at the end of 2010, if the rate of your tax bracket is set to increase in 2011, you may not want to wait on exercising any of the options. (Tax rates are not scheduled to rise during 2010, though increases may come as part of health-care reform or as a special tax to pay for the war in Afghanistan. At the end of 2010, when the current rates will expire, the top two marginal tax rates will rise to 39.6% and 36%.) For strategies regarding tax rate increases, see the three-part article series How Tax Rate Changes Impact Your Stock Grant Strategies on

When you do sell your company stock, reporting it on your tax return raises other issues and pitfalls. See the special section Reporting Company Stock Sales on, which has annotated examples of Schedule D.

2. Your restricted stock vested this year. Unlike stock options, which trigger taxes when you choose to exercise them, restricted stock usually gives you no control over the timing of your taxes because you are taxed when the shares vest. (There are two exceptions to this: choosing to be taxed at grant instead by making a Section 83(b) election, unavailable for restricted stock units, or RSUs with deferral features.) At vesting, you own the stock outright and have taxable W-2 income. Therefore, you can try to plan the timing and shifting of other income around this restricted stock income. Read more about this topic in the full FAQ at

3. The stock price dropped or increased after your exercise of nonqualified stock options (NQSOs) or your restricted stock vesting this year. The tax treatment of your ordinary income is fixed at NQSO exercise or restricted stock/RSU vesting. This is the tax rule for your federal and state income tax, regardless of the future stock price and whether you hold or sell the stock. For planning ideas, read the full FAQ at for its discussion of netting capital losses against capital gains and ordinary income.

4. You're over or near the yearly maximum for Social Security. If your income near year-end already exceeds the Social Security wage base for the year ($106,800 in 2009, and the same again in 2010), by exercising nonqualified stock options or stock appreciation rights in December you can avoid the 6.2% Social Security tax (1.45% Medicare tax is uncapped). If you wait until January, your wage base for the year starts at $0, and the 6.2% Social Security tax will again apply on the exercise spread and the vesting value of restricted stock up to the new maximum for that year.

5. You want to donate stock or cash. The end of the year is also a time when many people consider making gifts and donations of company stock, which are discussed in special FAQs at For company stock you own, once you understand the tax rules this is often a better approach than first selling the appreciated stock and then donating the cash. Be sure the stock transfer is completed by December 31 to make it count for the current tax year. For electronic transfers from your brokerage account, the donation is recorded on the day it is received by the charity/foundation (not when you approve the transfer). With increased year-end activity at brokerage firms, you should plan your year-end stock gifts as early as possible and have ongoing communications with your broker to ensure that the transfer takes place.

Read the full FAQ for more details of these ideas plus five other strategies, including ways to reduce the alternative minimum tax.

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How do stock grants affect Roth IRA contributions and conversions?

The grant itself (or participation in an ESPP) has no impact. However, the compensation income generated in 2009 from option exercise or restricted stock/RSU vesting can affect the contribution limits of a Roth IRA or your ability to convert a traditional IRA to a Roth. The amount of income which dictates your eligibility to contribute is called modified adjusted gross income (MAGI). This is your regular adjusted gross income with a few differences (e.g., any income from the conversion of a Roth IRA doesn't count in MAGI). If your MAGI exceeds the Roth income limits for your tax return, you lose the ability to contribute to a Roth IRA.

For the tax year 2009, the contribution amounts for Roth IRAs are $5,000 each for married joint filers, and $6,000 each for those who are or will be older than 50 before the end of 2009. To be eligible for these maximum contributions in 2009, married joint filers must have MAGI of $166,000 or less ($105,000 for single filers). The range for partial contributions extends from there up to $176,000 for married joint filers (to $120,000 for single filers) before it is completely phased out.

The effect of stock options depends on the type of option you have exercised. For details, read the full FAQ on

Converting Traditional IRAs To Roth IRAs

When you have AGI of $100,000 or less, you can convert all or a portion of your traditional IRA to a Roth IRA, if you prefer the benefits this type of IRA offers. Starting in 2010, this income limit on conversions will be eliminated (a tax-law change passed in 2006). Thus you may want to consider making a nondeductible contribution to a regular IRA for 2009, and then converting it into a Roth IRA in 2010.

When you do convert your traditional IRA to a Roth IRA, you will owe ordinary income tax on the value of any tax-deductible IRA (speak with your tax advisor about the related calculation). For a conversion in 2010 only, you can split the taxes due over 2011 and 2012 (50% each year). Income from your stock grants can help pay this tax. Also remember to consider upcoming income from stock compensation (e.g. known restricted stock/RSU vesting) in your tax projections when you are deciding whether to convert.

For further details on retirement plans and stock grants, whether at year-end or any other time, see the full coverage in the section Life Events on

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In Their Own Words: Financial Advisors On Strategies For Stock Options And Company Stock Holdings At Year-End 2009 And Beyond
These are uncertain times for stock markets and stock grants. The market downturn of 2008–2009, the volatility of the partial recovery since then, and the likelihood of tax-rate changes ahead under President Obama give you some unusual factors and issues to consider. We asked financial advisors around the United States for their ideas on planning for year-end 2009 and beyond. Read their responses in their own words. This article is available free to all registered users.

Stockbrokers' Secrets (Part 3): Year-End Planning For NQSOs, Restricted Stock, And RSUs, by W.E.B. Bantling and Michael Beriss
The time for tax planning is before the year ends; tax season is too late. For year-end 2009, learn about several ideas that apply to nonqualified stock options (NQSOs) and restricted stock/RSUs. Meanwhile, look ahead at the likelihood of tax rate changes under President Obama.This article is available free to all registered users.

Ten Ideas For Year-End Tax Planning With Stock Options And Company Stock
While investment objectives, not tax considerations, should generally drive your decisions, here are 10 ideas to review to prevent paying more taxes than necessary.

Year-End Strategies For Restricted Stock: Ideas To Consider In 2009, by Bruce Brumberg
As part of your year-end and year-beginning tax planning, don't forget to review any restricted stock grants that vested this year, plus other company stock holdings. This article presents five strategies that many experts suggest.

Stockbrokers' Secrets (Part 7): Year-End Planning For ISOs, by W.E.B. Bantling and Michael Beriss
Learn about year-end planning specifically for incentive stock options, including ideas related to the alternative minimum tax.

The ISO Tax Trap And The AMT Credit Myth: What To Do Before Exercise And At Year-End, by Alan Ungar
The tax reductions of the past few years have brought both good and bad news for holders of incentive stock options (ISOs). While you may have lower capital gains rates when you hold the shares long enough after exercise, it's harder to avoid the risks of the alternative minimum tax (AMT) and to fully recoup any AMT credit.

About E*TRADE Corporate Services
With over 25 years of experience, 25% of the S&P relies on E*TRADE Corporate Services for innovative, end-to-end equity compensation solutions that offer ease, choice and the flexibility to adapt to your company's unique needs. The powerful combination of E*TRADE Corporate Services and E*TRADE Securities allows us to provide stock plan administration services from six global service centers for over 1 million participants in more than 160 countries worldwide.


In 2009, the US consulting and research firm WorldatWork, along with the UK-based Performance and Reward Centre and Hewitt New Bridge Street, surveyed 844 mostly American and British companies to ascertain their use of stock plans and their attitudes toward them. (See Employee Equity Plans: Do They Have A Future?, Nov. 2009; the link works best in Microsoft Internet Explorer.)

  • More than half of the responding companies make stock grants to employees.
  • Their most common reason for operating stock plans is that "stock ownership aligns the interests of employees, management and shareholders; it generates employee focus on share price."
  • About 37% of the companies grant stock options according to employee level within the corporate hierarchy, and about 19% base grants on the location of employees. Significantly, however, about a quarter of them (26%) grant stock options to all employees, regardless of location or position within the company.
  • Grants of restricted stock or restricted stock units are based on employment rank at about 44% of the companies, and only about 11% base these grants on the location of employees. Like stock options, restricted stock/RSUs are granted to all employees at about a quarter of the companies (23%).
  • Over 60% of the companies operate employee stock purchase plans.

  • With ESPPs, employee level in the company is an eligibility requirement at only a negligible number of the companies (under 4%). The most common criteria for eligibility is location (about 48%), and over 37% of the companies make ESPPs available to all employees everywhere. The presence of "local barriers" to ESPPs is by far the most common reason (almost 74% of the companies) for not offering ESPPs to employees in some locations.

For the tax rules of 30 countries in Europe, Asia, and the Americas, see the Global Tax Guide on

Find a financial, tax, or legal advisor with experience in stock compensation

Stock compensation raises many questions.

  • When should you exercise stock options?
  • How can you minimize your tax bill?
  • Should you sell or hold restricted stock at vesting?
  • How can you diversify your company stock holdings?
  • How do you negotiate for stock compensation in your employment agreement?

While is a good place to learn about concepts, issues, and general strategies, at some point you may need an advisor to help with your unique situation. Yet finding a good advisor can be hard when you are busy and don't know where to start. The AdvisorFind Directory from is for you.

  • Identify and contact an expert who can provide specialized professional guidance on equity compensation.
  • Search for advisors by geographical area, type of advisor, years of experience, minimum portfolio size, and other key criteria.
  • Look up resources for performing background checks on advisors.

Searching AdvisorFind is free and does not require registration at


Our growing resource of online courses and exams now offers a total of:

  • 18 hours of continuing education credit for Certified Financial Planners (CFPs)
  • 15 hours of continuing education credit for Certified Equity Professionals (CEPs)

These credits are available from the following courses of study, each followed by its own exam:

This benefit is available only to Premium and Pro Members of To earn the available credits offered by each program, you must score 70% or better on the exam. Think you can ace the test? Visit the Learning Center to get started on a course of study. Then take an exam and show your stuff.

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