Granting Of Stock Options To Employees
Description
How to fill out Stock Option Grants And Exercises And Fiscal Year-End Values?
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FAQ
When the stock options are granted, the total stock option compensation expense is calculated as the fair market value of the stock options x the number of options granted. The company would debit stock option compensation expense and credit ?equity APIC ? stock option?.
Stock Option Granting and Vesting Basics You and the company will need to sign a contract that outlines the terms of the stock options; this might be included in the employment contract. The contract will specify the grant date, which is the day your options begin to vest.
Any compensation income received from your employer in the current year is included on Form W-2 in Box 1. If you sold any stock units to cover taxes, this information is included on Form W-2 as well. Review Boxes 12 and 14 as they list any income on Form W-2 related to your employee stock options.
Since you'll have to exercise your option through your employer, your employer will usually report the amount of your income on line 1 of your Form W-2 as ordinary wages or salary and the income will be included when you file your tax return.
Compensation expense is reported based on the stock's fair value (the market value) on the grant date. The shares are fully vested, and the company allocates the compensation expense over the service period, which is presumed to be the current period, unless other requirements are in place.