7543. Does the exercise of a stock option generate “wages” for FICA and FUTA tax purposes?Nuco Employeercline212014-06-26T15:49:00Z2014-06-26T15:49:00Z1139798Summit Business Media6193614Site Map/Investments/Stocks/Incentive Stock OptionsTaxFactsDefaultArticle120681037-00-tf2.xml1037.00;#1960;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 2How is the grant of an incentive stock option taxed? How is the exercise of the option taxed?
41700.0000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-14T22:56:45Z7543. Does the exercise of a stock option generate “wages” for FICA and FUTA tax purposes?The term “wages” excludes remuneration received on account of the following: (1) a transfer of a share of stock to any individual pursuant to an exercise of an incentive stock option; or (2) any disposition by the individual of such stock. The exclusion applies to stock acquired pursuant to options exercised after October 22, 2004.IRC Sec. 3121(a)(22); Act Sec. 251(d), AJCA 2004. Proposed regulations had provided that an individual exercising an incentive stock option would receive wages for FICA and FUTA purposes. But in 2002, the IRS announced that until further guidance was issued, the Service would not assess the FICA or FUTA tax, or apply federal income tax withholding obligations, upon the exercise of the option or upon the disposition of the stock acquired by an employee pursuant to the exercise of an option.REG-142686-01, 66 Fed. Reg. 57023 (11-14-2001); Notice 2002-47, 2002-2 CB 97. See also Notice 2001-72, 2001-2 CB 548, Notice 2001-73, 2001-2 CB 549. In AJCA 2004, Congress codified the exclusionary rule, above.