This will be a disqualifying disposition and you will no longer be subject to AMT on the spread between the exercise price and the FMV. Moreover, you aren't subject to payroll taxes even though you are taxed at the ordinary income rate. If you sell shares resulting from an ISO after the year of exercise but within a year of exercise or within 2 years of the grant, it is also a disqualifying disposition subject to ordinary income tax, but you are still on the hook for AMT in the tax year of the exercise.

This is a form of the dreaded Double Taxation. Those taxes are calculated based on the spread between the final sale price and the exercise price and the FMV at the time of exercise even if you have already paid AMT on the spread between the FMV and the exercise price. Recovering the AMT via credits on an ordinary income tax return could take a long time.

Stock option planning: Generating value

If shares resulting from an ISO are sold at least 1 year after the exercise and 2 years from the grant date, then the sale qualifies for long-term capital gains treatment on the spread between the exercise price and the final sale price. When ISOs are sold in a disqualifying disposition, then ordinary income tax is paid on the spread between the final sale price and the exercise price. ISO's are also not subject to medicare and social security taxes. If you hold employee stock options or restricted shares in a private company funded by institutional venture capital, feel free to contact us at the Employee Stock Option Fund for ways to reduce stock option taxes or more information on how we can assist you.

By doing so, you can not only avoid the risks associated with investing directly in a startup but possibly improve your taxes as well.

Careful Tax Planning Required For Incentive Stock Options | SD Mayer

For specific tax related support related to stock option exercises, please contact Scott Chou. This innovative service promotes and enables a healthier relationship between companies and employees. I my opinion it's valuable to employees and great for the overall tech environment and economy.

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It is good for nobody when employees feel trapped because they can't afford to leave. In less extreme cases exercising can be expensive and somewhat risky and this is simply a good smart hedge and a good square deal. Learn More. Our tax planning professionals create strategies to take advantage of new tax laws and legislation to minimize your current and future tax liabilities.

Four Key Tax-Planning Strategies for Executives Receiving Stock-Based Compensation

Financial Planning The world of increasing options makes it challenging to understand and make good choices for safely investing your hard-earned money and other assets for your future. Our advisors make the job easier by helping you make informed choices about your investments, your taxes and your future.

Our services include: Monthly bookkeeping Payroll and payroll tax preparation Billing for association dues, and collections. Compile, review, audit, and file annual financial statements Prepare tax returns, and offer Tax advisory services. Whether a general business valuation, divorce settlement, or some other economic related issue, we can provide expert witness and consulting services — in and out of the courtroom.

Tax Center We have assembled a wide range of links to to provides you with tools and information to complement our tax services. Track your tax refund Find useful calculators Stay current on the latest tax issues affecting individuals and businesses.

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Tax Planning Guide Recent tax reform has provided significant savings to individuals, families, investors and businesses. But, many of the opportunities are temporary.

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To help you make the most of the current tax breaks, our tax guide offers tips for minimizing your tax liabilities and maximizing your potential saving. View Online, or Download a Copy. Download your copy today. Tax Planning Guide. View All Commentaries. Monday am - pm Tuesday am - pm Wednesday am - pm Thursday am - pm Friday am - pm Saturday Closed Sunday Closed Contact us Electronically.

Your game plan for making the most of employer-issued stock options

Tax advantages abound Although ISOs must comply with many rules, they receive tax-favored treatment. If you need help tax planning for your ISOs, please contact us. About James B. Reynolds Jim became a partner in and managing partner July 1, Visit My Website. New law: Parents and other eligible Americans to receive direct payments - March 16, Estimated tax payments: The deadline for the first installment is coming up - March 10, Retiring soon? There still may be time - February 23, Did you make donations in ?

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