Stripe Faces $3.5B Tax Bill as Employees' Shares Expire

Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by xyzzyz on Wednesday March 08, 2023 @08:50PM (#35077417)

No, this is completely incorrect. The issue in question is about stock options, not stocks themselves. If you hold actual stocks, there is no tax bill until you sell these to realize the gains, and you can hold these forever. Instead, the issue at hand is about stock options. For those, the tax bill is due on exercise. For as long as you can hold the options without exercising, you don’t owe any tax, but the problem here is that you cannot have options that do not expire or have expiration date longer than 10 years. As this deadline is getting closer, option holders need to choose between exercising (and owing taxes on resulting difference between strike price and FMV), and forfeiting the options.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by theIV on Wednesday March 08, 2023 @09:12PM (#35077570)

If they are ISOs, tax won't be due _upon_ exercise but will show up on that years tax return. Usually the AMT will hit you (if the exercise was worth it), and you'll owe the following year.

This is a slightly longer way of saying I'm not totally sure how what you're saying invalidates what valzam said: as far as the IRS is concerned, you did realize gains (you got something of value), just not on anything "liquid," hence AMT. Perhaps they (IRS) use different terms, but that's basically what's happening.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by iav on Wednesday March 08, 2023 @09:59PM (#35077853)

when the gain shows up is irrelevant - IRS requires taxes to be paid on income in the quarter it is realized. Everyone needs to pay the estimated tax and then file the return for the final adjustment.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by theIV on Wednesday March 08, 2023 @10:38PM (#35078063)

I'm not super familiar with this aspect, so this could be totally off-base: because this is sort of "out-of-band" income, it might factor into what you should be paying, but you won't be penalized for it; you didn't know exactly what the estimated income was (i don't believe you have to get a 3921 immediately upon exercise) so you can't necessarily estimate the taxes owed. This could be totally wrong? Also, I think there's a lookback period of a year that you can base your estimated taxes on.

All of this to say, I think what you're saying is a much more precise way of saying what I was trying to get at. :)

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by danielmarkbruce on Wednesday March 08, 2023 @11:41PM (#35078383)

If they are given to you as income, you owe tax on the $$ value as though it was income. Ask anyone who works at Google or any of the big corps who give RSUs. The number of them that hit your account is always about 2/3 of the number which actually vested. The rest are withheld as taxes.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by xyzzyz on Wednesday March 08, 2023 @11:48PM (#35078407)

Again, you are talking about stocks. Options work completely differently. Unlike with RSUs, you don’t owe any tax on options when they vest, only when you actually exercise. I know how RSUs works, I have actually worked at Google for a number of years. Instead, you should ask someone who works at an earlier stage company how options work.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by danielmarkbruce on Thursday March 09, 2023 @12:12AM (#35078512)

Yes, I am talking about stock, in response to:

>> If you hold actual stocks, there is no tax bill until you sell these to realize the gains

There are taxes to be paid as soon as you get the stock. If you are at google - have you noticed the number of RSUs which hit your schwab account are less than those which vested according to that chart in your schedule? That's taxes being withheld. The stock vesting is considered income at that moment and taxed as such.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by polishdude20 on Thursday March 09, 2023 @12:49AM (#35078638)

I may be woefully misunderstanding here but say you exercise your options, sell them then get real cash for the sale all in the same day. Can you use that cash to pay your taxes when tax season comes around?

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by akhosravian on Thursday March 09, 2023 @01:11AM (#35078707)

Yes. The problem is there are various reasons why you can’t just sell stock or an early stage company the same day.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by danielmarkbruce on Thursday March 09, 2023 @12:50AM (#35078649)

You can use whatever cash you have to pay your taxes.

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by kgwgk on Thursday March 09, 2023 @05:55AM (#35080084)

Note that the 3.5bn (withholding) tax under discussion is not about options. It's about RSUs.

(There is also a less important amount of tax due - by more ancient employees - which is about options.)

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Re:Stripe Faces $3.5B Tax Bill as Employees' Shares Expire by alasdair_ on Thursday March 09, 2023 @09:58AM (#35081822)

It's about double-trigger RSUs with a 7 year limit. Stripe is now in year six. If they wait any longer, the RSUs become worthless (and the employees riot).

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