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Withholding on Equity Awards: Mastering Complex New FASB ASC 718 Standard and IRS Requirements

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, March 30, 2017

Recorded event now available

This course will provide corporate tax professionals to U.S.-based multinational corporations that withhold on equity awards with a detailed, practical and thorough guide to answer questions regarding U.S. income tax withholding rules applicable to equity compensation and how FASB ASC 718 update impacts corporate tax management.

Description

A recent change in financial accounting standards (FASB ASC 718) results in questions regarding the U.S. income tax withholding rules applicable to equity compensation. The accounting standard update is generally effective 2017 for calendar year public companies.

Some employers are under the impression that employees can now simply request withholding on equity compensation at the highest marginal individual income tax rate, currently 39.6%. However, this is not as simple as it appears because detailed rules and regulations—and plan provisions—may limit withholding options.

The IRS takes the position that the only ways to withhold on supplemental wages of less than $1 million per year are the supplemental income withholding rates or the aggregate method. Employers and employees alike are wondering whether withholding on supplemental income at the statutory maximum income tax rate is possible. Outside of the mandatory withholding requirement of Reg. 31.3402(g)-1(a)(2) for supplemental wages over $1 million, a 39.6% withholding rate is not expressly permitted.

The Service has for many years strenuously objected to the use of any such informal “work around” to avoid the strictly applicable federal income tax withholding regimes.

Listen as the panel provides tax executives and professionals with practical guidance for businesses that want to withhold federal income tax at a rate higher than the minimum withholding rate through use of the aggregate method and Forms W-4. The panel will also review and explain the impact of plan and grant documents on federal income tax withholding on equity compensation.

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Outline

  1. IRS equity compensation withholding rules
    1. Types of wages
    2. Overview of supplemental wages
    3. Permissible withholding methods
    4. Supplemental wage thresholds (<$1M, >1M)
    5. Form W-4
    6. State tax considerations
    7. Payroll practicalities
  2. FASB ASC 718 and impact on tax withholding
    1. Methods of withholding on equity awards
    2. ASC718 requirements for net share settlement
    3. Withholding changes under Notice ASU 2016-09
  3. Non-US watchpoints
  4. Plan terms and grant documents
    1. Plan term amendments
    2. Withholding of shares and materiality threshholds
    3. NYSE and Nasdaq on plan amendments
    4. ISS on plan amendments
    5. Communication with broker/administrator and employees

Benefits

The panel will review these and other key issues:

  • What are the changes that impact corporate tax management due to FASB ASC 718?
  • What are the detailed applicable withholding rules?
  • Supplemental wages and withholding employment taxes
  • What is the permissible method under IRS regs to withhold on supplemental wage exceeding $1 million?
  • What are the two permissible methods to withhold for supplemental wages below $1 million?

Faculty

Barbara Baksa
Barbara Baksa
Executive Director
National Association of Stock Plan Professionals

Ms. Baksa is a frequent speaker on equity compensation related topics, has authored numerous white papers and articles...  |  Read More

Zobayan, Marlene
Marlene Zobayan
Partner
Rutlen Associates

Ms. Zobayan has over twenty years of international tax and benefits experience, including global equity plans,...  |  Read More