A disqualifying disposition of stock received upon exercise of an ISO results in compensation income reportable on Form W-2.13 However, income resulting from a disqualifying disposition is not subjecttoFICA … of an ISO by filing Form 3921, Exercise of an IncentiveStockOption Under Section 422(b)...The spread at exer-cise is wages subjecttoFICA and Medicare taxes.9. Example. If the exercise price is $40 per share, the fair market value of the stock is $100 per share at exercise but it is $150 per … To avoid this counter-incentive, most employers encourage employees to make a “Section 83(b) election.”
The IRS has issued proposed regulations relating to incentivestockoptions (ISOs) … At the time an option is exercised, the individual who was granted the statutory stockoption would receive wages for FICA and … that is not subjectto income tax withholding upon a sale or disposition of stock acquired...Unlike non-statutory options, the offering period for incentivestockoptions is always 10 years, after which time the options expire. Vesting ISOs usually contain a vesting schedule that must be satisfied before the employee can exercise the options.SUMMARY: This document contains proposed regulations relating to incentivestockoptions and options granted under employee stock purchase plans. … There is no dollar limit on the wages subjectto the HI portion of FICA tax.
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Nonstatutory StockOptions (“NSOs”). To whom may options be granted? Only to employees. … disposition (even a disqualifying disposition) is not subjecttoFICA, of a NSO, income is subjecttoFICA, FUTA and federal income.The determination will be made by taking incentivestockoptions into account in the order in which they were granted. If such excess only applies to a portion of an IncentiveStockOption, the Committee, in its discretion...Incentivestockoptions. These qualify for special favorable tax treatment by the IRS. … Non-qualified stockoptions exercised by employees are subjecttoFICA and FUTA taxes and income tax withholding just like regular pay.