A critical portion of any company’s employee equity program involves calculating, withholding, paying, and reporting on taxes required by federal, state, or local tax authorities.
At first glance, the process likely seems familiar—an employer withholds tax on equity as they would for other compensation and passes the information to payroll. Payroll then indicates the amount withheld on employees’ W-2 forms as well as transmits the tax to the government.
However, there’s a requirement unique to equity compensation that complicates the process: Companies that report $100,000 or more in taxes to report for a single day must pay the withheld taxes within 24 hours of an employee receiving the benefit.