AMT and Equity Compensation
Alternative minimum tax, nonqualified stock options, incentive stock options and other forms of equity compensation.
Acquisition and tax of RSO sold
Posted by: ff4dl, November 17, 2014 02:03AM
My company is acquired and will close in early Dec. All my Restrict Stock (RSO) grants and stock options will be sold automatically.
For stock options, there will be tax withhold as they are treated as regular income. For RSO, could I request similar withholding.
If I make an estimate tax in Dec, would I face big penalty, as I am supposed to pay estimate tax in 4 payments, and Dec is way too late.
I have increased the W4 withholding, but that is not going to be enough for the amount to be sold automatically.
Would love to hear your advices. Thanks.

Re: Acquisition and tax of RSO sold
Posted by: Kaye Thomas, November 17, 2014 06:02AM
The company will withhold on the restricted stock as well as the options -- unless we're talking about stock you already owned that is being sold in the acquisition. Typically in a case like this, the unusually high withholding that occurs due to the options being cashed out prevents you from incurring a penalty from underpayment of estimated tax. The withholding may not be enough to cover all the tax (and you may owe a fairly large amount in April) but there's no penalty if your total withholding for this year is at least equal to the amount of tax you owed last year. (You can read more about estimated tax in our online guide to that subject: see the link in the left column.)

Kaye Thomas
Fairmark.com

Re: Acquisition and tax of RSO sold
Posted by: ff4dl, November 17, 2014 09:34PM
Thanks so much, Kaye. Great relief to know that.



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