Stock options and taxes
Advice and reference info from members. Join the HPAA Finance forum to discuss US personal finance issues -- such as Social Security and stock -- from an ex-HP perspective.tive.
Employee stock options allow the holder to purchase shares at the specified ("strike") price after a defined holding or vesting period.
The options that most HP, HPI, and HPE employees receive are termed "non-qualified" -- and do not have a value that can be determined before they are exercised:
- You do not realize any income when the options are GRANTED. (Unlike stock acquired through employee stock purchase and service awards.)
- When the options are exercised, the difference between the market price and the exercise price (that is, the discount times the number of shares) is treated as wage income. HP withholds taxes (including Social Security and Medicare tax) and issues a W-2 -- even if you are no longer an employee. This is income realized at the time of the EXERCISE.
Intuit's TurboTax website has an explanation and some example tax scenarios:
When options are exercised, Merrill Lynch mails a tax summary, which can also be
downloaded from the Merrill Lynch website:
Note that the Merrill Lynch tax summary is only for reference. What HP
has reported to
the IRS is given on the W-2 form you received from HP.
[Marc Lee, Tom von Alten -- April 13, 2014]
HPAA's master decode table with details of how shares of Hewlett-Packard have spawned shares of Agilent, Verigy, Keysight, Hewlett Packard Enterprise, DXC Technology, and Micro Focus: Stock Decoder
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