Source deductions, stock option benefits

Main challenge is managing gap between events
By Alan McEwen
|Canadian Payroll Reporter|Last Updated: 06/13/2013

Administering stock options can be challenging for payroll, particularly where the persons concerned are no longer employees and there are no other earnings from which to make source deductions.

These challenges increased after the related income tax source deduction requirements changed in 2010.

By “stock options” we do not mean benefit plans structured as a cash bonus based on the value of the company’s stock, without either stock options being granted or shares being issued. Cash payments made under such a “phantom stock option” plan are bonuses, pure and simple, and are subject to the same source deductions and reporting as regular salary or wages.