Stock Option Advice
February 24, 2012 8:51 AM   Subscribe

What type of professional is best to discuss stock options?

I have been given stock options by my employer. Great! However, I have no idea what to do with them. I know the details can be quite complex, so what type of professional should I speak to about my options? CPA? CFA? Tax Laywer?

Bonus question: Do you have a recommendation for someone in the San Diego Area?
posted by getmetoSF to Work & Money (6 answers total) 2 users marked this as a favorite
Best answer: Do you need basic understanding of the mechanics of stock options? There are some easy-to-understand explanations if you Google "employee stock option basics".

Your company has a corporate secretary who likely administers the plan. When I exercised options a few companies ago, that was the person who walked me through what I needed to do and what they do.

A qualified accountant can walk you through the basic tax implications of the exercise of stock options. The kind and amount of tax you pay is dependent on the type of stock option you have been granted, and what you do with the profit afterward.

If you have a financial or investment advisor, they are also familiar with the process of exercising options and reselling your shares on the market. You will need a brokerage account in place in order to complete this type of transaction; mine was set up in half a day.
posted by sillymama at 9:17 AM on February 24, 2012 [1 favorite]

A CPA or tax lawyer. Not a CFA.
posted by dfriedman at 10:03 AM on February 24, 2012

Response by poster: Thanks! I have lots of questions and really just need someone knowledgeable to ask. We may be going through an IPO soon, so I also wanted to understand the tax implications as they relate to me personally and any info a non-investment type should know before exercising and when would be best to do so.
posted by getmetoSF at 11:44 AM on February 24, 2012

No tax implications til you exercise. You can't exercise til they're vested, so you have years to figure this out.
posted by w0mbat at 12:04 PM on February 24, 2012

If you do, in fact, go through an IPO, the company is required to have a qualified person come explain to you in plain english how your options work (vesting, trading windows, etc.).

Generally speaking, the major factor for you is ISO vs. NQSO, which have very different tax implications when exercised.
posted by mkultra at 1:13 PM on February 24, 2012

Best answer: I assume these are ISOs. If they are NQSOs (non-qualified options) then the tax implications are very straightforward and if you already do your own taxes you can look up the situation on the internets and plan accordingly. Essentially all your gains would be taxed at your ordinary income tax rates. ISOs provide some real tax advantages such as allowing you to defer the tax otherwise due at exercise until the time that you sell the stock and convert that into a capital gain which is taxed at a much lower rate. However, exercise of an ISO can trigger a large Alternative Minimum Tax (AMT) liability. This is still less than your regular tax, usually, but you need to know the risks and have strategies to minimize your tax and your risk. A CPA is usually the way to go here, but not all CPAs have the right experience. In CA though it shouldn't be difficult at all to find a CPA with experience here. Tax attorneys can help too but that is probably overkill for this issue. The big risk is exercise an ISO, get a big AMT hit, wait one year to sell the stock and get the low capital gain rate but in the meantime the stock tanks and you wind up with an AMT liability in excess of your stock value. Ouch. That is not common, but one reason why you use a CPA or other knowledgeable professional to assist you in strategy and tax planning.
posted by caddis at 2:04 PM on February 24, 2012

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