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Home > Stock Options > Books >
5th ed. (February 2008). 322 pp. (6" x 9"), softcover. $25 for NCEO members; $35 for nonmembers.
This is a more selective and detailed reference than The Stock Options Book. (Many people get both books; for example, the Certified Equity Professional Institute has adopted both as texts for all three levels of its program.) The book addresses administration, state securities laws, federal securities laws, preparing for an IPO, handling death under a stock option plan, stock options and divorce, evergreen provisions, underwater options and repricing, and designing and implementing an employee stock purchase plan (ESPP). A lengthy glossary and an index round out the book. In this edition, every chapter (except chapters 7 and 8, where the authors did not find it necessary) as well as the glossary has been revised to bring the book up to date (as of the end of 2007) with recent developments.
Preface
Administering an Employee Stock Option Plan
Federal Securities Law Considerations for Equity Compensation Plans
State Securities Law Considerations for Equity Compensation Plans
Preparing for an Initial Public Offering
Handling Death Under a Stock Option Plan
Evergreen Provisions for Stock Plans
Underwater Stock Options and Repricing Strategy
Stock Options in Divorce
Designing and Implementing an Employee Stock Purchase Plan
A Layperson's Glossary of Employee Stock Option Terminology
Index
For federal income tax purposes, the compensation income recognized upon the exercise (or vesting) of a nonstatutory stock option is treated as a supplemental wage payment. This payment is eligible for withholding one of two ways. First, the compensation income may be aggregated with the employee’s regular salary payment for the period, with withholding computed on the total amount. Alternatively, the compensation income is eligible for withholding at the flat rate for supplemental wage payments.
In addition, employment taxes under FICA and the Federal Unemployment Tax Act (FUTA) may be due. FICA is made up of two separate taxes: (1) old age, survivor, and disability insurance (Social Security) and (2) hospital insurance (Medicare). The Social Security component of FICA is collected up to an annual maximum. The Medicare component is collected against the employee’s total income. The FICA rates and their applicable ceilings, if any, are subject to change annually. Arrangements should be made with the company’s payroll department for notification when any rate changes occur. FICA taxes are imposed on both the employee and the company, while FUTA taxes are levied against the company.
The withholding taxes collected by the company are only an estimate of the employee’s ultimate tax liability. It may be necessary for the employee to make additional quarterly tax deposits depending upon his or her personal tax situation (or to remit additional amounts owed when tax returns are filed). The company must furnish an employee (or former employee) exercising a nonqualified stock option with a Form W-2 for the year of exercise (or vesting) reporting the compensation income recognized as “wages.” If the optionee is a non-employee, the compensation income is not subject to withholding but must be reported on a Form 1099-MISC for the year of exercise (or vesting).
Copyright © 2008 by The National Center for Employee Ownership (NCEO) (phone 510/208-1300; email nceo@nceo.org; WWW http://www.nceo.org/). All rights reserved.
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