We’re excited to announce that we’ve enabled a new ISO/NSO split feature to help candidates and employees better understand their stock options, while also helping HR teams streamline their workflows. Continue reading to learn more about ISO/NSO splits and how our new feature can help you stay flexible.
Each year, the US Internal Revenue Code puts a limit of $100,000 in incentive stock options (ISOs) per every employee. Options that don’t fall within this limit are classified as non-qualified stock options (NSOs), which are subject to tax once exercised and may be taxed at a higher rate.
ISO/NSO splits can often be a bit tricky for both companies and employees. Not only can they impact the amount of taxes a company needs to withhold, but they can also affect how much employees owe on their taxes since ISO and NSO tax treatment may vary.
Companies and their respective legal teams are in charge of applying the specific ISO $100K rule as outlined in the Internal Revenue Code (IRC) to ensure all ISOs and NSOs are divided properly. For this reason, it’s crucial that companies and their legal teams track how the rule is applied to option grants.
In some cases, complicated modifications and transactions may be required to interpret and apply the $100K rule. Careful review and management is needed, and there are various approaches companies and law firms can take to keep track of grants and adhere to the rule.
Welcome has enabled ISO/NSO split grant type options within our Digital Offers and Total Rewards platforms. This helps teams simplify their current ISO/NSO split workflows when communicating stock options to employees, and it also provides new hires and employees with a clear breakdown of how their stock options are divided. Get a sneak peek below!
Learn more about getting started with Welcome by booking a demo or signing up for our free real-time compensation data.
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