Publication 15b |
2000 Tax Year |
Employee Stock Options
There are three classes of stock options--incentive stock
options, employee stock purchase plan options, and nonqualified
(nonstatutory) stock options.
Generally, incentive stock options and employee stock purchase plan
options are excluded from wages both when the options are granted and
when they are exercised (unless the stock is disposed of in a
disqualifying disposition). However, the spread (between the exercise
price and fair market value of the stock at the time of exercise) on
employee stock purchase plan options is included in wages subject to
social security, Medicare, and federal unemployment taxes when the
options are exercised.
The spread on nonqualified options normally is included in wages
when the options are exercised. (See section 1.83-7 of the
regulations.) These wages are subject to social security, Medicare,
and federal unemployment taxes, and income tax withholding.
For more information about employee stock options, see sections
421, 422, and 423 of the Internal Revenue Code and the related
regulations.
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