{"version":"1.0.0","segments":[{"startTime":6.09,"endTime":8.57,"body":"hello, tax simpletons just"},{"startTime":6.09,"endTime":8.57,"body":"made that up on the spot."},{"startTime":8.72,"endTime":12.74,"body":"This is taxes made simple after all, as"},{"startTime":8.72,"endTime":12.74,"body":"you probably noticed, the name of this"},{"startTime":12.74,"endTime":14.69,"body":"episode has the phrase speed round in it."},{"startTime":15.14,"endTime":16.88,"body":"The point of speed round episodes."},{"startTime":17.1,"endTime":21.27,"body":"Is to deliver the need to know aspects of"},{"startTime":17.1,"endTime":21.27,"body":"a dense but important tax topic in five"},{"startTime":21.27,"endTime":24.87,"body":"minutes or less, we know that we have"},{"startTime":21.27,"endTime":24.87,"body":"a limited amount of your increasingly"},{"startTime":24.87,"endTime":26.58,"body":"shortening attention span to capture."},{"startTime":26.7,"endTime":30.78,"body":"So this is going to be quick and painless"},{"startTime":26.7,"endTime":30.78,"body":"with me for today's inaugural speed."},{"startTime":30.78,"endTime":34.71,"body":"Round on stock compensation is"},{"startTime":30.78,"endTime":34.71,"body":"Natalie Cohen who runs a dark horse"},{"startTime":34.71,"endTime":36.42,"body":"CPA practice in Portland, Oregon."},{"startTime":36.99,"endTime":40.92,"body":"And today's discussion is for employees"},{"startTime":36.99,"endTime":40.92,"body":"and employers who want the quick"},{"startTime":40.92,"endTime":42.45,"body":"and dirty on stock compensation."},{"startTime":42.93,"endTime":45.48,"body":"We're going to release additional speed"},{"startTime":42.93,"endTime":45.48,"body":"rounds that go into further depth."},{"startTime":45.705,"endTime":48.225,"body":"On the topics touched on today"},{"startTime":45.705,"endTime":48.225,"body":"over the next couple of weeks."},{"startTime":48.885,"endTime":50.235,"body":"Hokey-doke Natalie."},{"startTime":50.295,"endTime":51.135,"body":"Thanks for being here."},{"startTime":52.035,"endTime":52.725,"body":"Glad to be here."},{"startTime":53.595,"endTime":55.575,"body":"And are you properly caffeinated?"},{"startTime":56.144,"endTime":57.165,"body":"I think I am."},{"startTime":57.195,"endTime":57.765,"body":"Let's go."},{"startTime":58.364,"endTime":58.724,"body":"Okay."},{"startTime":58.724,"endTime":59.745,"body":"Well, let's dive in."},{"startTime":59.925,"endTime":61.394,"body":"What is a stock option?"},{"startTime":62.375,"endTime":66.335,"body":"A stock option is as the name implies"},{"startTime":62.375,"endTime":66.335,"body":"an option to purchase a certain"},{"startTime":66.335,"endTime":68.104,"body":"number of shares at a certain price."},{"startTime":68.735,"endTime":71.104,"body":"And what does it mean"},{"startTime":68.735,"endTime":71.104,"body":"to exercise an option?"},{"startTime":72.075,"endTime":75.285,"body":"To exercise a stock option means"},{"startTime":72.075,"endTime":75.285,"body":"that you paid that certain price"},{"startTime":75.285,"endTime":78.975,"body":"to purchase a certain number of"},{"startTime":75.285,"endTime":78.975,"body":"shares after exercising the option."},{"startTime":79.125,"endTime":80.535,"body":"You now own those actual shares."},{"startTime":81.515,"endTime":85.575,"body":"And can you tell me a little bit"},{"startTime":81.515,"endTime":85.575,"body":"about what tax basis is tax spaces"},{"startTime":85.575,"endTime":89.134,"body":"is essentially a fancy way of saying"},{"startTime":85.575,"endTime":89.134,"body":"what you've paid for the shares."},{"startTime":89.495,"endTime":92.465,"body":"It can also be the amount that you"},{"startTime":89.495,"endTime":92.465,"body":"were taxed on as ordinary income."},{"startTime":92.465,"endTime":94.985,"body":"To the extent you didn't"},{"startTime":92.465,"endTime":94.985,"body":"actually pay cash for the shares."},{"startTime":95.7,"endTime":98.04,"body":"And what does the term vesting mean?"},{"startTime":99.02,"endTime":102.83,"body":"So you can think of vesting as being"},{"startTime":99.02,"endTime":102.83,"body":"synonymous with earning, when your equity"},{"startTime":102.83,"endTime":105.23,"body":"in a company vests, it is generally yours."},{"startTime":105.8,"endTime":109.94,"body":"Oftentimes employers will require equity"},{"startTime":105.8,"endTime":109.94,"body":"to vest over a number of years in order to"},{"startTime":109.94,"endTime":111.53,"body":"incentivize you to stay with the company."},{"startTime":112.01,"endTime":115.01,"body":"If you leave before any part of"},{"startTime":112.01,"endTime":115.01,"body":"the equity vests, you forfeit your"},{"startTime":115.01,"endTime":119.06,"body":"right to the equity and what exactly"},{"startTime":115.01,"endTime":119.06,"body":"happens when your equity vests."},{"startTime":120.015,"endTime":121.994,"body":"If it's an option, generally, nothing."},{"startTime":122.205,"endTime":126.315,"body":"If it's for stock, which is usually in"},{"startTime":122.205,"endTime":126.315,"body":"the form of restricted stock, you're a tax"},{"startTime":126.315,"endTime":130.005,"body":"on the fair market value of the stock on"},{"startTime":126.315,"endTime":130.005,"body":"the vesting date as if it had been paid"},{"startTime":130.005,"endTime":132.165,"body":"to you like normal cash salary or wages."},{"startTime":132.905,"endTime":137.315,"body":"And what is an 83 B election"},{"startTime":132.905,"endTime":137.315,"body":"and that's B as in boring."},{"startTime":139.234,"endTime":141.725,"body":"So an 83 B election is an election."},{"startTime":141.785,"endTime":145.385,"body":"So it's optional and requires"},{"startTime":141.785,"endTime":145.385,"body":"a filing with the IRS, right?"},{"startTime":146.01,"endTime":149.34,"body":"The election is made by someone"},{"startTime":146.01,"endTime":149.34,"body":"who has unvested options or"},{"startTime":149.34,"endTime":152.64,"body":"shares that is electing to be"},{"startTime":149.34,"endTime":152.64,"body":"taxed on the value of the equity."},{"startTime":152.64,"endTime":154.74,"body":"Now, before those shares best."},{"startTime":155.6,"endTime":158.3,"body":"So why would anyone make an 83 B election?"},{"startTime":159.109,"endTime":163.37,"body":"So if the value of the stock is increasing"},{"startTime":159.109,"endTime":163.37,"body":"or you expect it to increase than the"},{"startTime":163.37,"endTime":167.12,"body":"amount of tax you'll pay, if you make"},{"startTime":163.37,"endTime":167.12,"body":"the election now is less than it will be."},{"startTime":167.12,"endTime":171.2,"body":"If you wait until the stock vests"},{"startTime":167.12,"endTime":171.2,"body":"also the tax paid, when you eventually"},{"startTime":171.2,"endTime":174.74,"body":"sell the stock will likely be taxed"},{"startTime":171.2,"endTime":174.74,"body":"at more preferential tax rates."},{"startTime":175.244,"endTime":178.334,"body":"And what are the risks of"},{"startTime":175.244,"endTime":178.334,"body":"making an 83 B election?"},{"startTime":179.255,"endTime":182.834,"body":"So if the stock never vests, you"},{"startTime":179.255,"endTime":182.834,"body":"don't get to recover the taxes paid."},{"startTime":182.834,"endTime":186.845,"body":"And if the SOC loses value, all"},{"startTime":182.834,"endTime":186.845,"body":"you'll have is a capital loss,"},{"startTime":186.875,"endTime":190.144,"body":"which could take many years to"},{"startTime":186.875,"endTime":190.144,"body":"fully utilize against other income."},{"startTime":190.804,"endTime":193.894,"body":"So what types of stock"},{"startTime":190.804,"endTime":193.894,"body":"compensation are most common?"},{"startTime":195.334,"endTime":197.915,"body":"The different types of stock"},{"startTime":195.334,"endTime":197.915,"body":"compensation that I typically see"},{"startTime":197.975,"endTime":202.924,"body":"include non-qualified stock options,"},{"startTime":197.975,"endTime":202.924,"body":"also known as an SOS or non quals."},{"startTime":203.58,"endTime":209.4,"body":"Incentive stock options also known"},{"startTime":203.58,"endTime":209.4,"body":"as ISO's or ISOs employee stock"},{"startTime":209.43,"endTime":215.7,"body":"purchase plans also known as ESP"},{"startTime":209.43,"endTime":215.7,"body":"peas, restricted stock units also"},{"startTime":215.7,"endTime":220.53,"body":"known as RSUs and Phantom stock, which"},{"startTime":215.7,"endTime":220.53,"body":"can go by a number, different names."},{"startTime":221.1,"endTime":221.49,"body":"Great."},{"startTime":221.49,"endTime":223.35,"body":"So what is N N S L?"},{"startTime":224.36,"endTime":228.23,"body":"So an NSO is an option to buy a certain"},{"startTime":224.36,"endTime":228.23,"body":"number of shares at a certain price."},{"startTime":228.5,"endTime":231.92,"body":"When you exercise the option, you have"},{"startTime":228.5,"endTime":231.92,"body":"to pay tax on the difference between"},{"startTime":231.92,"endTime":235.21,"body":"the price you paid for the sock and its"},{"startTime":231.92,"endTime":235.21,"body":"actual value at the time you bought."},{"startTime":236.15,"endTime":237.56,"body":"And so what about an ISL?"},{"startTime":239.084,"endTime":242.144,"body":"And I suppose like an NSO,"},{"startTime":239.084,"endTime":242.144,"body":"except there's no tax due."},{"startTime":242.144,"endTime":243.644,"body":"When you exercise the option."},{"startTime":244.035,"endTime":247.665,"body":"In certain circumstances, you might"},{"startTime":244.035,"endTime":247.665,"body":"owe alternative minimum tax, also"},{"startTime":247.665,"endTime":251.535,"body":"known as AMT when you exercise an ISO,"},{"startTime":247.665,"endTime":251.535,"body":"but that's a topic for a different"},{"startTime":251.535,"endTime":256.774,"body":"conversation, I suppose, or tax once"},{"startTime":251.535,"endTime":256.774,"body":"the actual shares have been sold and"},{"startTime":256.774,"endTime":259.024,"body":"which is better an ISO or an NSL."},{"startTime":259.894,"endTime":259.985,"body":"Okay."},{"startTime":260.045,"endTime":263.795,"body":"Generally, I would say an ISO, as"},{"startTime":260.045,"endTime":263.795,"body":"it matches cash received with the"},{"startTime":263.795,"endTime":267.664,"body":"taxes owed from the sale, since"},{"startTime":263.795,"endTime":267.664,"body":"there was no tax owed exercise."},{"startTime":268.29,"endTime":272.31,"body":"Also the taxes have a higher likelihood of"},{"startTime":268.29,"endTime":272.31,"body":"being long-term capital gains rates, which"},{"startTime":272.31,"endTime":274.26,"body":"are lower than ordinary income tax rates."},{"startTime":275.12,"endTime":277.19,"body":"And what is N E S P P?"},{"startTime":277.82,"endTime":283.34,"body":"So an ESP P generally is the option"},{"startTime":277.82,"endTime":283.34,"body":"to buy stock at a 15% discount"},{"startTime":283.34,"endTime":284.84,"body":"from the current market value."},{"startTime":285.59,"endTime":288.56,"body":"That 15% discount is tax via payroll."},{"startTime":288.56,"endTime":292.31,"body":"When you purchase the shares, when"},{"startTime":288.56,"endTime":292.31,"body":"you sell the sock, you'll have either"},{"startTime":292.31,"endTime":296.45,"body":"long-term or short-term capital gain,"},{"startTime":292.31,"endTime":296.45,"body":"depending on how long you held the stock."},{"startTime":297.78,"endTime":299.13,"body":"And what is an RSU?"},{"startTime":300.36,"endTime":304.35,"body":"An RSU is essentially stock in the"},{"startTime":300.36,"endTime":304.35,"body":"company that becomes yours as it"},{"startTime":304.35,"endTime":306.93,"body":"best it's taxes, ordinary income."},{"startTime":306.93,"endTime":309.66,"body":"When it vests at the market"},{"startTime":306.93,"endTime":309.66,"body":"value at the time of besties."},{"startTime":311.33,"endTime":312.89,"body":"And what is Phantom stock?"},{"startTime":313.815,"endTime":316.484,"body":"So Phantom stock is basically"},{"startTime":313.815,"endTime":316.484,"body":"a stock appreciation, right?"},{"startTime":316.905,"endTime":319.875,"body":"Which means the right to participate"},{"startTime":316.905,"endTime":319.875,"body":"in the increase in the value"},{"startTime":319.875,"endTime":321.495,"body":"of a certain number of shares."},{"startTime":321.794,"endTime":324.104,"body":"The caveat is that you don't"},{"startTime":321.794,"endTime":324.104,"body":"actually own the shares."},{"startTime":324.284,"endTime":328.185,"body":"And oftentimes the rather rare"},{"startTime":324.284,"endTime":328.185,"body":"liquidation of it is required to get paid."},{"startTime":328.185,"endTime":331.995,"body":"When you own Phantom stock, when"},{"startTime":328.185,"endTime":331.995,"body":"you do get paid, it's in the form"},{"startTime":332.054,"endTime":337.984,"body":"of a bonus through payroll, we did"},{"startTime":332.054,"endTime":337.984,"body":"it, Natalie, you are a rock star."},{"startTime":338.76,"endTime":339.57,"body":"Few is right."},{"startTime":339.93,"endTime":342.9,"body":"That's a lot of information to cover in"},{"startTime":339.93,"endTime":342.9,"body":"a short amount of time, but we did it."},{"startTime":343.969,"endTime":344.33,"body":"Okay."},{"startTime":344.33,"endTime":345.11,"body":"Well that wraps it up."},{"startTime":345.11,"endTime":347.96,"body":"I think we're just under maybe a"},{"startTime":345.11,"endTime":347.96,"body":"little about the five minute Mark."},{"startTime":348.14,"endTime":352.01,"body":"So join us for our next speed round"},{"startTime":348.14,"endTime":352.01,"body":"where we'll dive deeper into NSOC and"},{"startTime":352.01,"endTime":356.45,"body":"ISO's so thank you for tuning into"},{"startTime":352.01,"endTime":356.45,"body":"TMS, or if you're not into the whole"},{"startTime":356.45,"endTime":360.89,"body":"brevity thing, taxes made simple because"},{"startTime":356.45,"endTime":360.89,"body":"there's TMI and then there's TMS."},{"startTime":363.284,"endTime":367.575,"body":"And now for the disclaimer, the content"},{"startTime":363.284,"endTime":367.575,"body":"in the proceeding podcast should not in"},{"startTime":367.575,"endTime":369.615,"body":"any way be construed to be tax advice."},{"startTime":370.034,"endTime":371.775,"body":"All tax laws are nuanced in."},{"startTime":371.775,"endTime":374.415,"body":"Those are applied to each"},{"startTime":371.775,"endTime":374.415,"body":"unique situation differently."},{"startTime":374.805,"endTime":378.675,"body":"Don't be a dummy IRS CPA,"},{"startTime":374.805,"endTime":378.675,"body":"preferably a dark horse CPA."}]}