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Taxes - Help with mergers & acquisitions, raising capital, creating stock options and other equity plans

Archive for the ‘Taxes’ Category

Exercising a Stock Option – How do I do it?

Exercising options can money to someone's hands.

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Exercising a stock option can be just as confusing as the initial introduction into your employee stock option purchase plan. The terminology can be intimidating and the process can be tedious, but with the proper level of preparation and an attention to detail, it should be smooth sailing. When exercising a stock option there are three ways to do so, they are:

1. Cash: If you are exercising an option with this method, you must have enough money in your brokerage account to cover the cost of any applicable taxation and the exercise price.

2. Sell all: This method involves instructing your broker to sell all exercised shares and requires no out-of-pocket expenditure on the part of the optionee (you).

3. Sell to cover: This form of exercise is when some portion of exercised shares are sold. The amount sold is just enough to cover the option price and total taxes. The shares that are sold are given to a broker while the unsold shares are given to the optionee.

Here at Stock Connections, we specialize in employee stock options and equity compensation plans. If you or anyone you know is hoping to learn more about exercising stock options, feel free to contact us today. We are ready to help you understand your options and move forward.

Stock Connections specializes in working with San Francisco Bay Area companies that are involved in mergers & acquisitions, are raising capital, or creating stock option or other equity plans. We help start-up, private and public firms become – and remain – SEC-compliant. Stock Connections’ services are designed to help both start-ups and established firms comply with SEC and other regulations in their equity compensation programs. If you or anyone you know is looking to get involved with any of the above, we encourage you to contact us today.

Photo Credit: Tax Credits

Rule 10b5-1: What Is It? Why Do I Care?

Do you understand your 10b-5 trading plan?

Rule 10b-5 was set forth by the SEC under the Securities Exchange Act of 1934 to allow insiders of a publicly traded corporation, like executives and board members, to have their own trading plan and invest in their own stock without any liability and avoid any charges of insider trading.

The qualifications for rule 10b-5 include that the individual must not be aware of any material non-public information, and the purchase must be made during an open window.  The rule 10b-5 trading plan also states that there should be detailed information of future plans to purchase or sell shares made by the individual at a time when the person has no knowledge of insider information. Furthermore, the individual must have documentation that shows all sales or purchases that were made in accordance with the preset trading plan. And of course, the plan must be adopted in good faith.  Read the rest of this entry »

Employee Stock Options

What exactly is an ISO?

Employee stock options, as explained last week, are stock options that are offered to employees from their employer. Businesses often grant employees a share of the company’s stock. While the different stock options they give may seem confusing, we are here to ensure that the process is as clear and simple as possible. Today, we will talk about one kind of employee stock option called an incentive stock option.

What is an incentive stock option? Let us define it…

Incentive Stock Option: An incentive stock option, or ISO for short, is a stock option that is only available to employees. This exclusiveness comes with both pros and cons. This option will not affect your income tax if the shares are held for at least two years from the grant date and one year from the date of exercise.

What are the grant date and exercise date?

The grant date is the date that the company grants an employee the shares of the incentive stock. The exercise date is the date that the employee exercises their ability to purchase the shares of the incentive stock.

What if I do not wish to hold the stock for the two year time period?

If an employee who purchases the incentive stock seeks to sell the stock back before the two year period is over, then any gain on the incentive stock is taxed as regular income. The tax gain must be reported on an employee’s W2 form.

What if I sell the stock after the two year mark?

Taxes are due in the year that the sale takes place. If the incentive stock is held for over a calendar year, the employee must record the value of stock on the original exercise date. This value should be reflected in an employee’s AMT (alternative minimum tax) calculation.

We hope this was helpful in deciding if an incentive stock option is best for you. Keep in mind that there are a multitude of other employee stock options. Do not hesitate to contact us with any questions you may have. If you or anyone else you know is hoping to learn more about an incentive stock option, or employee stock options plan, then we urge you to contact Stock Connections, today.

Stock Connections specializes in working with San Francisco Bay Area companies that are involved in mergers & acquisitions, are raising capital, or creating stock option or other equity plans. We help start-up, private and public firms become – and remain – SEC-compliant. Stock Connections’ services are designed to help both start-ups and established firms comply with SEC and other regulations in their equity compensation programs. If you or anyone you know is looking to get involved with any of the above, we encourage you to contact us today.

Photo Credit: FaceMePLS

Stock Options – The Basics

 

How do I turn my stock options into cash?

Stock options can be a tricky thing to comprehend and the terminology associated with these options can be rather confusing as well. To help combat the confusion that many employees experience when issued stock options, we have created a series of videos to help our clients better understand the elements involved in various financial situations. Today, we introduce the basics of employee stock options and will delve into the terminology that defines the standards of stock option procedures. Read the rest of this entry »

Stock Option Taxation: A Quick Guide for Understanding

 

Don’t let taxes catch you off guard – Be prepared!

With all the various forms of employee stock options, we commonly hear questions concerning their taxation. When each option is taxed depends solely on the individual standards that each type of stock option has had set in place. In our recent video on taxation, we introduced a few of the common procedures that are used when determining what those stock option standards may be. First of all, it is important to point out that in the United States, there is no taxation of any form of equity when it is granted to you. The taxation that will occur is dependent upon the type of equity or stock option granted. Read the rest of this entry »

Acquisition: What Happens After a Shift of Power? Part 6

Who will profit from your stock options?

In our last blog post, we continued to uncover aspects of a merger or acquisition that could impact the financial future of your employee stock options. We began discussing popular exchanges that could occur and introduced the cash exchange and exchange for buyer options. As an employee, a merger or an acquisition is nerve racking, it brings out insecurities because of the unknown and sparks a plethora of questions.

In our sixth and final installation, we will continue to discuss that burning question we introduced in parts one, two, three, four and five, “What will I get for my stock options?”  Read the rest of this entry »

Incentive Stock Options: Tax Return Tips and Tricks Part Two

Are you subject to AMT?

In our last blog post, we introduced basic tips for regular reporting procedures in relation to incentive stock options. In this blog post, we will delve deeper into the issue with an introduction to alternative minimum tax and relevant reporting standards. Let’s start by understanding the basics of the alternative minimum tax and who it applies to.

What is it? Alternative minimum tax is a system of taxation within the American tax system that was originally designed to keep the loop holes used by wealthy tax payers closed. These days, the alternative minimum tax expands taxable income and disallows common deductions within the middle class. Read the rest of this entry »

Retirement Planning – How Will Tax Rates Affect My Plan?

Photo Credit: Images_of_money

Retirement is something everyone in the workforce eventually hopes or plans for, but with definite changes to our tax system and new tax rates coming down the line, it is more important than ever to understand how the effects of these landscape changes could impact your investments and plans for the future.

There are six tax brackets in the U.S tax system and they are divided according to marginal tax rate and annual income.  Each of these six brackets and their tax rates will be affected by changes in 2013. Read the rest of this entry »

5 Tax Return Mistakes to Avoid in 2012 – Part 2

 

Photo Credit: Images_of_Money

Many questions may arise when filing your taxes. In the previous part of this blog series we discussed three commonly made tax return mistakes. In this part, we’ll outline two more mistakes and what you can do to avoid them. Read the rest of this entry »

5 Tax Return Mistakes to Avoid in 2012 – Part 1

photo credit: x_JamesMorris

The 2012 tax season has the potential to be more confusing than most, especially if you sold any stock last year. Even if you hire a tax specialist to handle your tax return, you can benefit from knowing some of the basic income tax reporting mistakes to avoid. In this blog post, we’ll outline three common tax return mistakes you should stay away from. Read the rest of this entry »

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