Tax and financial advice from the Silicon Valley expert.

Equity compensation isn’t subject to Railroad Retirement Tax

The U.S. Supreme Court resolved a conflict of interpretation about whether employee stock options are subject to Railroad Retirement Tax.

The Court ruled that equity compensation isn’t subject to the Railroad Retirement Tax.

The retirement system for the railroad industry was nationalized by the Railroad Retirement Act of 1937.  Railroad employers pay taxes on employee compensation, somewhat like the social security system.

Under the Railroad Retirement Act, the tax applies to “any form of money remuneration.”

The IRS claimed that stock options should be considered to be “money remuneration.”

The Supreme Court said that money is understood to be currency issued by a recognized authority as a medium of exchange.  While stock can be bought or sold for money, it isn’t usually considered to be a medium of exchange.

 

What investments besides securities and bank accounts can you make with a Roth or IRA?

The interview on Financial Insider Weekly for this week is with Bill Neville, Certified IRA Services Professional of The Entrust Group. Our interview subject is "Making alternative investments with your IRA or Roth account."

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Tax and financial advice from the Silicon Valley expert.