Recording Equity bonus?

5512_Raleigh

not sure how to enter a bonus that is paid in company stock? My wife's company often awards shares of the company as a performance bonus, announced at the yearly review. We pay normal payroll taxes on the amount of the stock on the day it is transferred into our account. Do I simply add shares into the ETrade account?

Tom Young

"Do I simply add shares into the ETrade account? "

No.  If the award is "X" amount of shares but you receive "Y" amount of shares because of payroll taxes and withholding then you should be be doing the detail accounting for all of that activity if you're trying to keep your records accurate.

One way of doing this is to record the value of the "X" amount of shares as "compensation" income, (i.e., as regular salary), and distribute the value of the "Y" amount of shares among the various payroll taxes and withholding Categories.  These numbers will be included in her year-end Form W-2 along with "normal" paycheck amounts.

You could make this entry in your regular checking Account "as if" the money was paid in cash, and then transfer the "net" cash over to your brokerage Account where you'd "buy" the shares.  (As a practical matter, that's exactly how the IRS looks at these things.)  That series of transactions will leave your bank Account balance unchanged and get the stock's value properly recorded.

5512_Raleigh

Thanks, this helps. BTW, we had elected to pay the taxes with cash transferred into our account ahead of time rather than have the company reduce the number of shares.