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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6169
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am getting stock from my company from a recent IPO. The

Customer Question

I am getting stock from my company from a recent IPO. The company is taking a percentage of the stock from my total, saying its to pay the taxes. Is this common practice? And do I have an option to ask for the full amount and pay the tax myself instead?
Submitted: 6 months ago.
Category: Tax
Expert:  Stephen G. replied 6 months ago.

Yes, it is common practice.

The reason it is done this way is that the law requires than the Company withhold the applicable taxes and report that withholding on your W2. If you make arrangements to deposit the required withholding from another source of your funds and keep all the stock without selling any of the shares, that is permissible, but that will require that you make that deposit before the stock is issued.

What the Company is doing is the normal way that the stock options are handled when they are exercised to acquire the related Company stock.

You do not have the option of paying the tax yourself rather than having the tax deposited with the Company and reported on your W2. When you file your income tax return you will pay any additional tax due or receive a refund for any tax overpaid through withholding.

Steve G.

Customer: replied 6 months ago.
Thanks for the explanation. Which option makes more sense financially, assuming I have the funds to pay the tax out of pocket? I would assume having more shares would be the better option.
Expert:  Stephen G. replied 6 months ago.

Well, that's strictly an investment decision and would depend upon your evaluation of the Company's prospects for growth and profitability. In these recently "public" companies, personally I like to look at "Insider Trading" and see what the officers of the Company are doing with their stock. It's common for the officers/founders/stockholders to sell/dispose of some of their stock to raise funds for personal needs, funding college educations, making gifts to family, investment diversification and other requirements. However, beyond that if they are making additional investments in the Company, it's at least some indication of what they consider the company's prospects are. If you have a limited investment portfolio at this point (of course I have no idea of your financial/investment situation), then you might consider selling some of the shares in order to make alternative investments to diversify your portfolio. It's never good to put all your eggs in one basket.

Steve G.

Expert:  Stephen G. replied 6 months ago.

Just following up..................

I see that you have had a chance to read my response; do you have any additional follow-up questions?

If not, or if you have questions on another topic, please remember to rate my response here or I won't receive my share of the payment that you already made to the site.

Steve G.

Expert:  Stephen G. replied 5 months ago.


Expert:  Stephen G. replied 3 months ago.

Just checking in...In reviewing my "open" questions, I see that you have viewed my previous comments but have not provided a rating for me.

Is there something else I can do to satisfy you, or may I clarify anything with respect to your question?

Despite the extended time following your question & my response, I would be happy to clarify anything for you or to answer any follow-up questions you may have.

If you don't have any additional questions or comments, then I would appreciate it if you would provide a rating so that I may close out your question favorably & receive my share of the payment you made some time ago.

Thanks very much,

Steve G.

Expert:  Stephen G. replied 2 months ago.

Did you experience problems with re-locating your question after I responded to it? AND/OR,

Did you by any chance experience problems with the rating system?

I ask as around the time of your question the site was having some issues in this regard and some of the ratings weren't credit to us. If that was an issue with you, perhaps you could just indicate your rating in words, hopefully good, very good or excellent. If you would take a moment to do that, customer service with credit me with responding to you and close out the question favorably.

Thanks very much,

Steve G.

Expert:  Stephen G. replied 2 months ago.

Just checking in.....................

I'd like to close out this question before the end of the month, if possible.

I would appreciate it if you would take a moment to let me know if I can assist you further and/or if you would provide a rating for my responses as indicated above.

Thanks again,

Steve G.