One. With respect to the Federal Insurance Contributions Act (FICA), the remuneration received is included in the following year (1) of the year in which the services are provided therein or (2) of the year in which the deferred remuneration becomes unshakable. The provisions relating to the exercise and forfeiture of the plan determine whether the rights of the executive are unwavering. If Phantom Stock Units get out of control, the value of Phantom Stock Units can be included as salaries subject to FICA and Medicare taxes. This is the case, although the sums are only subject to income tax when they are actually paid to the employee. If the employees` base salary (before phantom stock) exceeds the FICA salary base, no additional FICA tax will be levied on phantom share payments. However, both the company and the employee would be subject to Medicare`s payroll tax, since the Medicare tax is levied on the total salary with no salary cap. Companies choose different ways to reward employees, especially those who hold important positions and/or have been in the company for a long time. If you are not sure if a Phantom action plan is right for you, whether you are the employer or the employee, you can get advice from financial professionals. Phantom shares are considered a compensation plan. A Phantom Stock program must meet the requirements of the Internal Revenue Service (IRS) code 409(a).

The plan must be duly verified by a lawyer, with all relevant details in writing. For accounting purposes, phantom stocks are treated in the same way as deferred cash remuneration. Since the amount of the liability changes each year, an entry is made for the accumulated amount. A loss of value would reduce liability. These inputs do not depend on unshakability. Phantom share payments are taxable to the employee as ordinary income and deductible to the business. However, they are also subject to complex rules on deferred remuneration which, if not properly followed, may give rise to punitive taxes. [Citation required] Once the conditions are set, staff members are allowed to receive payment in exchange for their units. The amount of the payment depends on (1) the number of unshakable units they hold, 2) the value of the units at the time of payment, and (3) whether the plan was for the full value of their units or only for the capital gain from the date of grant. Suppose an employee received 10 phantom shares with an initial value of $7 and assumed that the shares will be valued at $15 on the day of payment. At the time of payment, the employee would receive $150 below a full value plan and $80 under an Appreciation Only plan. Typically, only selected employees are selected to get phantom actions, for example.

B management. Phantom Stock Plans are compensation agreements that are granted to employees based on the value of the company`s shares. The price, since these are not real shares, does not give employees any ownership rights in the company. Phantom Stock is a contractual agreement between a company and a Beneficiary of Phantom Shares that gives the Beneficiary the right to pay in cash at a given time or in connection with a given event, the payment of which will be made up to an amount linked to the market value of an equivalent number of shares of the Company. [1] Thus, the amount of the payment increases with the rise in the share price and decreases when the share falls without the beneficiary (stock exchange) actually receiving shares.. . . .