3/23 Company Night

We were able to kick off the post-Spring Break calendar off this past week with a company night for Austin Wealth Management. We had a great time learning about some real-world tax implications for many of our members as they prepare to enter the workforce. Read on for a full recap below.

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Compensation

• Accrued vacation (employee benefit) is taxed as ordinary income

• Different companies offer different forms of compensation (stock, RSUs, ISOs, etc) with each having different implications

• RSUs - restricted stock units, stock only awarded after employee stays at company for x years

  • Private companies can give RSUs, but they are worthless until company goes public

  • With RSUs, you are taxed when the shares arrive in your brokerage account

• Vesting - shares come in increments (x amount of shares each year)

  • Enter your brokerage account and get taxed in that year

  • Taxed as ordinary income regardless of what you do with the stock

• ISOs - incentive stock options

  • You must pay for these

  • You get a discount of your company’s stock, but you must hold the stock for a certain amount of time

Texas State Taxes

• Texas has no state income tax

  • Regarded as a tax-friendly state

• Texas has high property taxes

• Pensions are taxed differently by state

• Tax laws tend to widely differ by state

  • You should keep this in mind when deciding where to live

Advice For Younger People To Become Familiar With Taxes

• Understand your paycheck and why money is being deducted

• Understand W2 form and its components before going to Turbo Tax or H&R Block

• Compensation gets increasingly more complex as you progress in career

• Turbo Tax is sufficient for younger people, but it may not be the best option if you have capital gains or more complicated earnings

• Learn about a Roth IRA account - useful for younger individuals who can grow funds for 50-60 years and then withdraw tax-free

  • Delayed gratification - you are taxed now at low tax bracket and then avoid high bracket in future

• Employer 401(k) match is free money - not necessarily tax related, but take advantage of this

• Reading benefits package is important before signing job offer

• Take advantage of retirement accounts and Roth accounts at a younger age

• Equity compensation has several tax implications where people pay more than they need to

• Crypto can be confusing

  • It is treated as an alternative asset

  • People don’t realize they get taxed on crypto gains even if they used it to buy stuff

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