At Slack, income was determined by the first day trading price. So with RSUs, take your total that’s vested and multiply it to the days 1st trading stock price. That’s your income. Now, you’ll likely have an opportunity to sell a good portion of it immediately (known as “sell to cover”) which allows you to sell a good chunk (22%) to cover taxes right then and there-there are other options but it’s too complicated for me to explain it all. Come tax season you’ll have to make up the difference between your income tax rate and whatever was sold during the sell to cover. I’m kind of screwed when it comes to taxes since I’ll likely be hit with a 35% tax rate this year due to the windfall of income from the direct listing. So basically I’ll have to pay about 13% of what I “received in income on the first trading day”. This means if the stock price rises after the first day, that’s great! 13% of first trading is okay. However 13% of a higher than current price is not good, which the current stock price is below opening day. However, I’m pretty bullish on Slack so I see it bouncing back a lot higher. Hopefully soon.
Closes on first day. So basically youre waiting to see where it closes at opening day. A pop is always good but you want it to stay and climb higher, especially at tax time. Example, if it closes at $10 and you have 20 rsu- you get taxed on making $200 income come tax time, regardless if you sell or not immediately (benefit of going the direct listing route which doesn’t have a lock out period 😊). Come tax time, the IRS will say you made $200 so pay taxes on $200. You’ve already paid $44 (~22% if going to sell to cover route immediately) so they’ll just ask for the delta between your income tax rate and the amount you already paid. If you’re income tax rate is 35%, the iRS s will ask for 35% of the $200 minus the $44 you already paid. Not a bad deal if the stock price is $100 (you have $100x20 = $2k of assets to pay your taxes with). Cha Ching! However, let’s say your stock is worthless, at $1 a share come tax time. The IRS still said you made $200 even though you only have 20x$1 = $20 in stock value. Fuck.
One last thing. It’s always better to go public bEFORE April 15th if you plan on using your stock earnings to pay taxes. Why? Because you only pay 15% capital gains on stock held over a year whereas you pay your income tax rate against any earnings for sales of less than one year.
Crazy shit. I just have you a wealth of knowledge regarding all of this. Pay it forward and let your co workers know.
Uber has been fairly nice there, ours are taxed when we can exercise (the "triggering condition"), so they only become taxable when they can be used to offset the tax burden (for most: after the ipo lockup ends).
Your employer will include it on your W2 as it vests. If you sell your vested shares at a profit, you'll report a long-term capital gain (sold >1 year after vesting) or short term capital gain (sold <1 year after vesting). LTCG is taxed at a flat 20% while STCG is taxed as ordinary income.
Airbnb uses double trigger I think, which means it gets taxed only after it vests and after becomes liquid, not when you sell it. In a normal IPO the stock price used by the IRS to calculate how much you owe is the IPO price (I believe). However, if it ends up being a direct listing, there's no price defined, so idk what the IRS uses... Since Slack and Spotify did it, I expect theis employees to know how it works!?