For employees, how do taxes work for your options on IPO. Are taxes calculated based on the IPO date or when the lockup period ends?
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- Pinterest poissonsOptions are not taxed until exercise, and then taxed as income. RSU is taxed as income at IPO with stock price = the price the company sells to underwriters (not opening day price). That is $45/share for Uber. Most employees have RSUs not options.
- LeanTass, they are taxed as income when they are given to you, not when you sell them. Since the company is not liquid, the stock is as good as cash and thus is taxed at that point. From employee perspective, instead of getting 100 shares in their account, they will get 60. 40 shares will be auto sold so money can be sent to IRS. Same as every paycheck you get.
- Uber and Lyft were giving RSU before they were public but they would not actually vest. They had double trigger vesting. For example, once you hit your 1 year cliff, you were owed the RSU but they would not be given to you until a liquid event such as IPO. So for tax purposes, you had not actually received any RSU compensation until IPO.
- Yes, if you hit your time based vesting trigger, that stock is only waiting for the liquid based vesting trigger. You as an employee performed your part so even if you leave, when the company becomes liquid, the stock will best. There is however an expiration date to the RSU, something like 7 years, so if the company is not liquid by then, they go away, whether or not you are an employee.
- It is different for employees who have options vs employees who have RSU. Only early employees have options so for most employees, it is RSU. For RSU, anything that was vested at time of IPO is taxed at that price as income. This is handled by the companies withholding the appropriate amount of shares so ideally the employee pays the taxes at best time with the shares.
- Options -
Depends on your strike price
Depends when you exercised them.
Depends when you sell them.
I don't think IPO price or lockup price matters.