I’m talking about an email being sent around that applies only to my company, therefore I can’t go to a dictionary or encyclopedia and point to some irrefutable proof that the email is bunk. Here is the email:
That’s it. My comments are in the [brackets]. All emphasis is the original, and all typos (if any) are from the original email. What is worse, the email did not reach us guys on the front lines electronically- somebody must have received it and ran off a hundred or so photocopies because there is a stack of them at the front door to the office.
Some background: The Founders’ Grant is a stock option package that we won last year during strike negotiation. We all received 100 shares of stock that we can cash in after 3 years. I am financially inept, but I assume this is what the email is talking about when it says “exercise your option”.
Not knowing anything about my company (and you really shouldn’t need to since this sounds like a Federal tax matter), what are the problems with this email as you see them?
My analysis:
Chain email is automatically bunk.
Nobody in my office recognizes the name of the sender.
General nature of email: “Do this or else!”
Name of originator of email omitted, so it is impossible to trace back to the source.
(nitpick) The 2nd bullet is superfluous. You can remove it and still satisfy the conditions of the email.
Logical dilema: The email implies that the company might have my SSN incorrectly recorded (otherwise why am I calling to verify it?). If it is in the company computer wrong, it should assume I am not who I say I am when I punch it in differently.
Most obvious flaw: How could the Fed stick me for 33% extra tax just because I didn’t jump through some hoops?
What the hell is “Federal tax backup withholding” anyway?
The last line (“The message will tell you what you’re not able to do…”) makes no sense to me. Why would a recorded message inform me of a list of things that I am not able to do?
There is no way to know if following these steps had any effect (good or bad) after completing them.
As a general rule, if a company is required by law to give you a 1099 for income you received they must get your Social Security number. This is so that the IRS can “match” the income you report on your tax return with the income on your 1099.
If you chose not to give them your social security number or they don’t get it for what ever reason they are suppose to withhold 30% from the money they give you and pay it to the IRS similar to having taxes withheld from your paycheck.
When you file your tax return you would get credit for those withholdings. (It isn’t like actually having to pay extra tax.) In practice the company issuing the 1099 usually doesn’t bother with the backup withholding because it is too much trouble.
I am not sure how this applies to you because that email didn’t make much sense. But, I think this is what it was trying to get to.
(I am remembering this off the top of my head so any additional details would be appreciated.)
The e-mail sounds extremely garbled, but may not be entirely bunk.
I suspect that it has to do with backup withholding on securities transactions when the broker (or other agent) does not have tax information for the seller.
If a broker does not have information about a seller’s status as a U.S. taxpayer (usually the seller’s social security number on a W-9 Form (PDF file). If the broker does not have a W-9 (or eguivalent, like your phone call, I guess) They have to do backup withholding of 31% of the proceeds. See the form for more details.
The money withheld would be returned or credited to you when you filled out your next year’s tax return, but the government would have it in the meanwhile.
I believe that this is what the e-mail is talking about. My suggestion is to make the call.
So the most obvious flaw turns out to be the single nugget of truth. I get it, I just wish they had included some actual information in that email as opposed to using the “Do this or else!” tactic.