Equity compensation is pay in the form of company stock or options; restricted stock units are taxed as wages at vesting, non-qualified options at exercise, and incentive stock options at sale, with alternative minimum tax exposure at exercise.
Each type has a different timing rule and a different tax character, and companies withhold on some but not others. Token grants in crypto companies are generally treated like restricted stock.
Why it matters: under-withholding on RSUs and AMT on ISOs are the two most common surprises, and both are planning problems, not filing problems.
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Definitions are general information, not legal advice, and may not reflect the most recent changes in law.
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