Tax Aspects of Executive Compensation
Executives have special tax issues. The exercise of stock options, deferred compensation, and substantial bonuses can all give rise to questions about the timing of income. In addition, because executives often perform services in multiple states or countries, state tax consequences can make a big difference in how much of their hard-negotiated and hard-earned compensation they get to keep. Retirement, change of residence, or change of domicile can have important income tax consequences for executives that less highly compensated individuals may not face. As with all tax questions, it’s far better to get expert tax advice in advance than to wait until a tax problem presents itself. For example, you don’t want to find out that the severance package you accepted (and for which you may have exchanged an agreement not to compete) is worth much less after-tax than you anticipated because it’s taxable in state A rather than state B.
Executives sacrifice enormous amounts of time and personal freedom to make their employers’ businesses succeed. They are trained to surround themselves with the best business advice, but the demands on an executive’s time can make it a challenge to think about the personal advice he needs to see clearly and get the most out of his compensation arrangements.
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