As you conduct year-end tax planning, be sure to address equity compensation if your company issued it in any form in 2017.
Equity compensation includes restricted shares, options, phantom shares, SARs, profits interests, and others, and planning now prepares your business not only for year-end audit but also taxes and administration.
Start by assembling documents for board approvals, such as grant agreements, changes to the plan, modifications to awards, and memos or reports.
You'll also need to update your records with new awards. That includes information and documentation on new recipients, as well as the type and number of units, vesting conditions, terms, waterfall rights, and 83(b) filings.
To ensure IRS safe harbor compliance, you'll need to document the exercise price on stock options, and threshold values for profits interests and SARs granted during the year. And don’t forget to review vesting status for service, performance, or market conditions, and identify the vested and unvested units for each recipient.
While that’s a solid start, you're not done yet. Use these ten tips to smooth the process and help you prepare. From board oversight to making payroll status changes, year-end planning for equity compensation enables you to avoid last-minute surprises.