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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I received recently fully vested shares in an S-Corp, so I

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I received recently fully vested shares in an S-Corp, so I am expecting a tax liability at the market value of the shares as calculated on a minority shareholder basis. If the tax is taken out now, I won't receive a pay check for the next two months. Should the employer take the full tax amount, or leave it to me to pay on my tax return? Is there a requirement to do it one way or the other?

RD :

I presume the value of the shares will be reported as payroll to you.

RD :

The employer(S Corp) can withhold all the tax due on this amount or you can request the employer to not withhold and you can pay the tax yourself at tax time.

RD :

As long as you have total withholding upto 100% (110% if your AGI prior year was $150K or more) of your last year's tax, you do not have to make additional tax payment in estimated taxes.

RD :

You can make the payment of tax due when filing the tax return.

Customer:

RD - sounds like the answer I'd like to hear. The part of my question asking if there is a requirement to do it one way or the other is an indication that I'd like to know the reference the answer is based on. Do you know the portion of the tax code that applies so I can make this request to the company on a legal basis?

RD :

Normally your tax withholding from payroll is based on the W-4 form provided to the Corp. Receiving stocks is a fringe benefits and subject to taxes as a supplemental wages. Supplemental wages (which would include your situation) provides for the option that the wages can be considered as part of regular wages and tax can be taken out as it would on your regular payroll.

RD :

Link for your reference

RD :

http://www.irs.gov/publications/p15b/ar02.html#en_US_2011_publink1000193805

Customer:

Thank you. There is sufficient detail in your response and in the reference to satisfy my question.

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