For everyone that get's Stock Options at work--Qff topic but important
 

TIME TO FORK OVER SOME MORE CASH TO THE GOVERNMENT
Do you have any stock options at work. Are you participating in a employee stock purchase plan? About 10 million Americans do. As you know, you don’t have to pay any income tax when you exercise these options. You do have to pay capital gains taxes when you sell.

Well … the IRS has come up with some new rules. They want to get some money out of you when you exercise these options. Effective January 1, 2003 the IRS will start collecting payroll taxes on these options. That means the full Social Security tax and the full Medicare tax.

Remember … there is absolutely no limit whatsoever to the hunger the Imperial Federal Government has for the fruits of your labor.

Some of your Senators and Congressmen are working to thwart the IRS plans on this one. Perhaps you might want to let them know how you feel!


From www.boortz.com--today's notes.

Doug: I posted it in General Discussion but wanted the L guys to be sure and see it.

Dan

Dan

I have heard rumors about the same thing... It is not law yet as far as I know..
All my options are under water so I am not too concerned....

Doug

Not yet...
 

Greenspan is pushing hard for the IRS to make options come out of corporate earnings.

I haven't heard a thing about this and I'm pretty careful about options taxes (options are 80% of my income)

Coldie

Hopefully this won't happen. I have to exercise a number of options in 2003...

So would you get hit for cap. gains and payroll taxes?

The idea
 

I think the idea is the would tax you on the base value of the stock options:

you get 1000 shares at 10 dollars. Day one they tax you for $10,000 income.

When you sell, you pay capital gains on the profit.

The options law changes I saw were related to the corporate tax implications since cuurently MANY high tech companies are awarding options as a salary replacement or enhancement and the corporation is benefiting by not having to pay tax on it when awarded.

Doug

I'd like a better explanation, because what Coldie described doesn't seem right, even for the IRS.

Using his example, let's say I exercise the option at the same $10 price. I have gained nothing, so there shouldn't be anything to tax.

If you were to get taxed as Coldie suggested, I suspect that very few people would want stock options.

thats the point
 

the government is trying to come up with a way to avoid another "enron" situation....

they figure by making stock options look really bad, that most people will turn them down...........

I think people are all confused on the subject. My take was that the SEC was trying to pass a law to make Corps disclose stock options as part of compensation. This would affect how corps report earnings. As it is now "exercised" options don't count agaisnt earnings (profits).

Mor explanation
 

Currently (using the same example, 1000 shares $10) you only pay capital gains on the profit... or AMT if you hold the shares.

But you're buying the shares with post tax-dollars.

I agree with silver_2000. The only changes I've seen are for corporations forcing them to record option grants as an expense (currently they don't and it's a HUGE loophole).

Coldie