Chapter 15 - Chapter 15: Principals of Taxation Employee...

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Chapter 15: Principals of Taxation Employee Versus Contractor -Decided by state law: -Regulations, rulings, and court cases -Degree of supervision, materials, person versus job -Employer consequences: -Employer avoids FICA on contractor, with hold taxes, employee benefits -Want a contractor so they don’t have to pay social, health, or any other benefits. -Employee consequences: -Contractor MAY have additional deductible expenses, but often SE (self employment) tax is higher Employee Stock Options -Stock option defined: the right to buy stock in the future at the exercise price -Types provided for an employer plan: 2 different tax options, can do and have both -NSO: Non-qualified stock option, corporation prefers NSO -ISO: Incentive stock option, employee has better tax -GAAP rules: must report compensation expense related to FMV of option at grant date: -FAS 123R Stock Options- Employee -Grant-date you receive the right to buy stock in the future at the exercise price -No taxable income for NSO and ISO -There is a vesting period (ex. 1,000 shares, but receive 20% over 5 year) -Must be vested before you can exercise -Exercise-date you pay the exercise price on the option and receive the stock -NSO-ordinary income= FMV exercise price, employer will run it on your W-2
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This note was uploaded on 04/02/2008 for the course ACCT 4440 taught by Professor Stec-helsta during the Fall '07 term at Colorado.

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Chapter 15 - Chapter 15: Principals of Taxation Employee...

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