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If Stripe had offered 83(b) and issued cash bonuses to cover exercise costs, would this tax issue been avoided?
by choppaface 4y ago
If Stripe had offered 83(b) and issued cash bonuses to cover exercise costs, would this tax issue been avoided?
- JumpCrisscross 4y agoYes. Or if they permitted a legitimate secondary market.
- kasey_junk 4y agoRSUs are not eligible for an 83b election.
- JumpCrisscross 4y ago> RSUs are not eligible for an 83b election I may have misread, but I think OP implied everyone would have been better off with options. There were a few years when RSUs were the craze, but they mostly screw holders.
- kasey_junk 4y agoThe article is a bit of a mess as it says “exercise restricted stock units” which is not a thing. Other reports have said that Stripe is raising to cover RSU tax bill that would come from letting them vest in order to prevent the RSU from expiring.
- panopticon 4y agoHow do RSUs mostly screw holders compared to options? I don't have a lot of experience with options, but they generally seemed riskier.
- choppaface 4y agoWith RSUs, if you are taxed on receiving them in any way and yet they are not liquid or you decide not to liquidate them, then the RSU price could go to zero and you’ve lost more than everything because you can’t necessarily recoup the taxes. That said ISOs have similar risk but additionally you could lose whatever you paid to exercise and also you could incur AMT which complicates your tax return quite a bit.
- kasey_junk 4y agoThat’s not how it _should_ work. RSU grants are normal income. Taxes should be withheld as such by the granter. Which is the assumed reason Stripe is raising money. Because they are on the hook for withholding and must pay that bill in cash. Now, like all income if you set your withholding incorrectly you can owe at the end of the year.
- jcdavis 4y agoAFAIK most of the pressure is around RSU expiration, not options. So - no (Unless we're talking about Stripe changing this equity program even further)
- choppaface 4y agoBut RSUs are shares and this don’t expire? ISOs and Non-quals expire after 10 years typically.
- chowchowchow 4y agoRSUs do expire if they do not have the qualifying events to convert to shares in time, with a window similar to option expiry. It sounds like Stripe is going to declare a qualifying event which will convert outstanding RSUs into shares which will bring along with it a major tax implication for the RSU holders, who would be in a really tough spot if they got a windfall of totally illiquid Stripe equity. So Stripe is going to buy shares to facilitate tax withholding, for which they need the $$ they are raising.
- choppaface 4y agoHuh, did Stripe move to RSU-based packages earlier than typical? So they would have had to move from options to RSUs in, like, year 4 of the company? Didn't Facebook not do RSUs until year 6?
- chowchowchow 4y agoI think that’s right. If the RSUs had a 7 year window and they are expiring this year it means they started granting them in 2016.