2 Qs: options for a private co and payroll taxes

[georgeharrison]

Thanks in advance for any advice.

1) I was laid off from a start up in June.  I have until Sept 15th to exercise my options.  I don't know what to do with these.  If I had to guess, I'd say the company is 2 years out from IPO.  If I exercise, there is nothing I can do with them, right?  Or is there?  The strike price is like $1.10 and the "value" is like $3.27.  I have 1770 shares, I think, so it would cost me just over $2k to buy them.  I don't really want to do that and just hang on to them.  

2) My new job is HQd in NYC.  I live in Arkansas.  I received my first full check last week and they took NY state taxes out, but not Arkansas.  I asked payroll about it and they said:  

• Since you are not located in Arkansas for a business need, your set up is: Resident State = Arkansas (per your address) & Work Location State = New York. The Default Withholding Requirements for Arkansas is "Exempt from resident taxes if work-in taxes withheld". This means that you will have NY State Income tax withheld from your paychecks but no taxes withheld from your paychecks for AR. 

I know I am not required to pay state tax in two states on the same income, but what I thought (with no basis, just a guess) was that I would pay both out of my check and then be refunded for one or the other when I filed my return.  I want to be sure that I'm having the appropriate withholdings.  At my last employer, they switched payroll companies mid-year and they stopped withholding my state taxes during that transition.  I didn't notice, because it was when our benefits changed an my net was all screwy anyway.  And it took me MONTHS (embarrassingly) to notice that on my stub.  I ended up owing Arkansas state tax AND they sent me a bill a few months later for the underpayment during 2021.  Needless to say, I'm feeling like a do-do when it comes to this.

Not important, but I lived in WA until I was over 40 and WA does not have state income tax, so I'm still learning...

[Cheerio]

I live in Kansas and work in Missouri. I file Missouri taxes and am taxed on the earnings I make there and then I file Kansas taxes and receive a credit for taxes paid to another state. Sounds like you make have a similar situation. If I were you, I would check the tax rates for New York and Arkansas; I assume New York taxes at a higher rate and thus you wouldn't owe anything to Arkansas on your income (you may still be taxed on other income like interest, though).

[dottyblue]

New York has a convenience of the employer rule which means because you work from another state not for a business purpose (ie you aren’t a sales person who covers Arkansas and the surrounding states for the business) you owe NY state tax. It’s very unique, but NY is very strict in enforcing it.

You should speak with an accountant/ personal tax advisor to determine now if Arkansas will honor the taxes paid to NY. Every state handles it differently and your employer isn’t liable for your AR taxes (and can’t advise you on your personal liability). You don’t want a surprise when filing next year.

[gt7301b]

You probably have an option to do a cashless exercise of the options so you don't actually have to buy the stocks.   The downfall is if you don't buy and hold the options the gains will be treated as ordinary income rather than capital gains.


www.investopedia.com/terms/c/cashlessexercise.asp

[puppylove64]

My only input is that NY is not very tax friendly. They want to collect taxes from everyone. I would talk to an accountant about if you will owe in both places.

[sent]

My husband works in NY but we live in NJ. We have to file a return in NY every year and are usually refunded what is deducted from his paycheck there. I don't know if it's the whole amount or how it is figured out, I've never looked too closely. There has to be a lot of info out there on this since lots of people commute in to work in NY from the surrounding states or even WFH for NY based employers.

[jwright]

taxnews.ey.com/news/2020-0349-arkansas-ruling-holds-that-a-remote-workers-wages-are-not-subject-to-state-income-tax-withholding


If you use a paid tax preparer, I would check with them; I have no experience with Arkansas income tax, but the above analysis by EY suggests that you may be subject to income tax from both states. I have had plenty of examples of income being taxed twice (legally) so you need to look into that.