Employer Stock Options
These instructions refer to employer stock options that are exercised upon vesting. When NSQOs vest the difference between the exercise price and the underlying stock price incurs FICA and income tax at your ordinary tax rate and generally reported on a Form W-2. For this reason, we recommend adding the gross income from NQSOs (generally NQSO difference between the grant price and the FMV) as an income stream on the vesting date by selecting the same start and stop age.
The NQSOs will incur Capital Gains tax when they're withdrawn. For this reason we recommend creating an after-tax account with the Capital Gains tax treatment, and adding a contribution to account for the value of the NQSOs.
STEP 1: Add an income stream
Head over to My Plan > Income > Work
Press Add a job ➕
Give the job a descriptive name, “ACE Employee NQSO,” for example.
Add an income stream to represent the gross income from the NQSOs on the vesting date by selecting the same start and stop dates.
STEP 2: Add a savings account
Navigate to My Plan > Accounts and Assets
Press Add an account ➕
Select Investment/Savings/Checking account
Select manual entry
Give the account a descriptive name, "ACE Employee NQSO," for example
Enter $0 for the balance
Select Capital Gains as your tax treatment
Enter the $0 for the Cost Basis
Enter 0 for the turnover rate
Select your optimistic and pessimistic rates of return
Exclude the account from your withdrawal strategy
Head over to Money Flows and add a contribution ➕ and enter the value of the NQSOs
Select the same start and stop age for the contribution
* You also have the ability to make the contribution directly from the income stream into the after-tax account.
If you receive extra shares, you may wish to add those to the account as a Windfall. Head over to My Plan > Income > Windfalls
Press Add a windfall ➕
When asked "Which account do you want to model a contribution to?" select the new NQSO account