What is equity-based compensation?
Equity-based compensation can trigger taxable income to employees when equity interests are granted , vested and/or exercised.
A couple of example:
- If an employee exercises a nonqualified stock option and the exercise price is $5 per share and at the time of exercise the fair market value of a share is $10, the employee has taxable income of $5 per share.
- If an employee is awarded restricted stock and the right to the restricted stock vests, the fair market value of the stock may be taxable income to the employee upon vesting.
Equity-based compensation is complex. If you are unsure whether or not an employee should be taxed on any such compensation, you should consult your own tax advisor or legal counsel.
How is equity based compensation reported in Justworks?
Your company is required to report taxable equity-based compensation to Justworks. You may be able to record equity-based compensation directly to Justworks through the Fringe Benefit tool. If you have any questions about using the tool, or are dealing with a more complex matter, please reach out to your Account Manager or our Customer Success Team.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.