Stock options are a popular form of compensation provided to employees of corporations. Although commonly used, compensatory stock options involve a number of tax issues that are frequently overlooked by employers.
Compensatory stock options typically take the form of incentive stock options issued to employees (which must meet the criteria set forth in Code section 422) or nonqualified stock options (issued to employees and other service providers and not required to meet such criteria). The tax treatment to both the granting employer and the option holder varies depending on whether the options are incentive stock options or nonqualified stock options.
Read a September 2015 report [PDF 193 KB] prepared by KPMG LLP: What’s News in Tax: Stock Option Compensation—Warnings for the Unwary
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