Equity plan program managers and participants have likely heard of an 83(b) election (“Election to include in Gross Income in Year of Transfer”), but often its application and advantages are misunderstood. Section 83 of the Internal Revenue Code (IRC) governs several tax functions when determining the tax consequences of transfers of restricted property such as equity or stock. These special rules determine whether an employee has income resulting from a transfer of property, when an employee will recognize taxable compensation, and how much taxable compensation will be recognized.
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Author Lynn Carbo
Lynn is a Director in GTN’s Atlantic region. She has over 20 years of experience in expatriate and individual taxation. In addition to consulting with companies on equity compensation issues, she works with clients and their employees to accomplish a variety of solutions to their global challenges. +1.484.885.2438 | lcarbo@gtn.com
The provision of long-term incentives, such as stock options and other equity compensation, to employees who work in multiple locations has always been challenging. Because not all jurisdictions treat equity income in the same manner for tax purposes, companies can face many uncertainties when trying to understand their reporting and withholding obligations. Mobile employees can face complex tax filings and even double taxation.
Attracting and retaining skilled workers in today’s tight labor market takes more than a competitive salary. Many companies find they can meet their employment needs and their employees’ incentive preferences by offering a portion of their compensation as equity.
