Personal Finance

Tax from Employee Stock Purchase Plan

  • Last Updated:
  • Mar 13th, 2019 10:34 am
[OP]
Sr. Member
Jun 18, 2018
741 posts
376 upvotes
Toronto

Tax from Employee Stock Purchase Plan

My workplace has an Employee Stock Purchase Plan (ESPP) where we get a 15% discount off the stock price. The company stock is listed on NYSE. 10% of my salary is deducted bi-weekly (coinciding with when I get paid) and accumulates until the purchase period, at which time the $CAD is converted to $USD first, then stock purchased at 15% discount. I have no plans to sell it at the moment.

There has been 2 purchasing period thus far; once in 2018 Q4 and then 2019 Q1, however nothing is reported on my T4 2018. Instead, they included the full share purchase discount as a benefit in my Jan 2019 pay slip. Is this wrong on my employer's part? FYI this also raised the amount of taxes I paid in that payslip by like $100 (both regular income tax and CPP), which of course because it is a taxable benefit. I guess my question is shouldn't they have split it by when it was purchased? I will be making more money in 2019 vs 2018 so doesn't this hurt me more? Maybe the effect is minimal but I am still curious.

When I asked HR this was the reply I received: Your January xth 2019 pay statement shows 15% discount taxable benefit of your Q4 2018 deductions (when I first began to purchase stock). Your Q4 deductions were Net Salary / 0.85 =$x. $x - Net Salary = the benefit amount. FYI the Net Salary is also net of my contribution to purchase the stock (of course).
1 reply
Deal Addict
Nov 10, 2018
2491 posts
2470 upvotes
Electrah wrote:
Mar 13th, 2019 10:26 am
My workplace has an Employee Stock Purchase Plan (ESPP) where we get a 15% discount off the stock price. The company stock is listed on NYSE. 10% of my salary is deducted bi-weekly (coinciding with when I get paid) and accumulates until the purchase period, at which time the $CAD is converted to $USD first, then stock purchased at 15% discount. I have no plans to sell it at the moment.

There has been 2 purchasing period thus far; once in 2018 Q4 and then 2019 Q1, however nothing is reported on my T4 2018. Instead, they included the full share purchase discount as a benefit in my Jan 2019 pay slip. Is this wrong on my employer's part? FYI this also raised the amount of taxes I paid in that payslip by like $100 (both regular income tax and CPP), which of course because it is a taxable benefit. I guess my question is shouldn't they have split it by when it was purchased? I will be making more money in 2019 vs 2018 so doesn't this hurt me more? Maybe the effect is minimal but I am still curious.

When I asked HR this was the reply I received: Your January xth 2019 pay statement shows 15% discount taxable benefit of your Q4 2018 deductions (when I first began to purchase stock). Your Q4 deductions were Net Salary / 0.85 =$x. $x - Net Salary = the benefit amount. FYI the Net Salary is also net of my contribution to purchase the stock (of course).
1) it doesn't matter.
2) in your case cap gains is calculated based on selling price minus full price at date of purchase since your employer taxed you on the benefit already.
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