Hello bogleheads,
I recently came into an unexpected windfall via unexercised stock options in a company I work at and will be paid out shortly due to a recent M&A event.
I've talked to my CPA and realize everyone's tax situations are different. The main question I'm debating is whether to exercise the options and take them as a short term capital gain or be paid as straight income through my company's payroll.
I've researched various issues from AMT, to NIIT, to whether I can offset gains with losses. I want to make sure there isn't some big glaring issue my advisor and myself have overlooked. I think it's going to be a big tax bill regardless.
Thank you for reading. Have always enjoyed reading this forum from afar.
Unexpected Windfall, Tax Questions
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Re: Unexpected Windfall, Tax Questions
What's the point of exercising after the M&A event since you'll owe STCG which is taxed the same as W-2 income, right? I don't see any advantage unless you have some huge losses you can use to offset the gains.
Re: Unexpected Windfall, Tax Questions
If you take it through payroll, does that mean that you'll pay the typical payroll taxes?Bluem_11 wrote: ↑Tue Jan 18, 2022 12:32 pm Hello bogleheads,
I recently came into an unexpected windfall via unexercised stock options in a company I work at and will be paid out shortly due to a recent M&A event.
I've talked to my CPA and realize everyone's tax situations are different. The main question I'm debating is whether to exercise the options and take them as a short term capital gain or be paid as straight income through my company's payroll.
I've researched various issues from AMT, to NIIT, to whether I can offset gains with losses. I want to make sure there isn't some big glaring issue my advisor and myself have overlooked. I think it's going to be a big tax bill regardless.
Thank you for reading. Have always enjoyed reading this forum from afar.
Re: Unexpected Windfall, Tax Questions
That's my understanding talking to my company lawyer.exodusNH wrote: ↑Tue Jan 18, 2022 12:58 pmIf you take it through payroll, does that mean that you'll pay the typical payroll taxes?Bluem_11 wrote: ↑Tue Jan 18, 2022 12:32 pm Hello bogleheads,
I recently came into an unexpected windfall via unexercised stock options in a company I work at and will be paid out shortly due to a recent M&A event.
I've talked to my CPA and realize everyone's tax situations are different. The main question I'm debating is whether to exercise the options and take them as a short term capital gain or be paid as straight income through my company's payroll.
I've researched various issues from AMT, to NIIT, to whether I can offset gains with losses. I want to make sure there isn't some big glaring issue my advisor and myself have overlooked. I think it's going to be a big tax bill regardless.
Thank you for reading. Have always enjoyed reading this forum from afar.
Re: Unexpected Windfall, Tax Questions
It sounds like it would be better to take it as short-term gains, then, since you would skip paying the various payroll taxes.Bluem_11 wrote: ↑Tue Jan 18, 2022 1:43 pmThat's my understanding talking to my company lawyer.exodusNH wrote: ↑Tue Jan 18, 2022 12:58 pmIf you take it through payroll, does that mean that you'll pay the typical payroll taxes?Bluem_11 wrote: ↑Tue Jan 18, 2022 12:32 pm Hello bogleheads,
I recently came into an unexpected windfall via unexercised stock options in a company I work at and will be paid out shortly due to a recent M&A event.
I've talked to my CPA and realize everyone's tax situations are different. The main question I'm debating is whether to exercise the options and take them as a short term capital gain or be paid as straight income through my company's payroll.
I've researched various issues from AMT, to NIIT, to whether I can offset gains with losses. I want to make sure there isn't some big glaring issue my advisor and myself have overlooked. I think it's going to be a big tax bill regardless.
Thank you for reading. Have always enjoyed reading this forum from afar.
If you are typically above the Social Security limit, then you'd be on the hook for only the 1.45% Medicare tax and maybe unemployment taxes.
If they'd be paid as wages, would you get any additional 401k matching? If so, that might be worth taking the income as W2.