Employee stock purchase plans (ESPPs)

Light music plays throughout.

Onscreen text:
Employee Stock Purchase Plan:
What is it?

Narrator [off-screen]: An employee stock purchase plan, or ESPP, is an optional benefit that allows employees to set aside after-tax dollars from each paycheck to buy shares of their company's stock.

Onscreen text:
An employee stock purchase plan, or ESPP, is an optional benefit that allows employees to set aside after-tax dollars from each paycheck to buy shares of their company's stock.

An animation of a woman sitting at a desktop computer appears. She adjusts a desk lamp and sets down a coffee mug.

Narrator: And these shares are available to employees at a discounted price that's lower than what you would pay on the open market.

Onscreen text:
And these shares are available to employees at a discounted price that's lower than what you would pay on the open market.

The woman turns on the computer and views a page showing a pie chart of stock allocations. As she looks on, the price goes from $400 a share to $300.

Narrator: There are a few important terms and dates associated with ESPPs.

The desktop screen enlarges to replace the animation.

Narrator: Most companies offer a two- to four-week enrollment period. After you're enrolled, the Offering Period begins, which means your after-tax payroll deductions start accumulating.

The word "Enrollment" appears. A line emerges from "Enrollment," ending with "Offering Period begins"  to represent the amount of time between the two events. A calendar rises out of "Offering Period begins."

Narrator: Your contributions build up during the Offering Period, and then shares of your company's stock are bought for you on the Purchase Date.

The line continues on past the calendar into the "Offering Period," where cash appears above it. The Offering Period ends at the Purchase Date.

Narrator: Multiple Purchase Periods fit into what is called an Offering Period, and each one ends with a Purchase Date.

The Offering Period separates into two different Purchase Periods with individual Purchase Dates.

Narrator: The Purchase Date is when the money that has been accumulating is used to purchase shares of the company stock at the discounted price.

A circle containing cash appears, which is then replaced by certificates. The text "Purchase Date: buy shares of company stock at discounted price." appears next to the certificates.

Narrator: The purchase price is the stock price at the end of the purchase period, less the discount offered. In this example, the company's stock price on the purchase date is higher than the price you bought it for. Therefore, there is an unrealized gain.

A line graph showing an upward trajectory of a company's stock price appears, representing the time between the Offering Date and the Purchase Date.

Narrator: The discount is applied to the company's stock price on whichever date the price is lower. In this example, the purchase date price is lower than what you paid for it on the offering date, so the discount is applied to the Purchase Date. Of course, be sure to check with your company for specific plan information.

The same line graph showing a company's stock price, this time with a downward trajectory for the price by the Purchase Date, appears. A blue box containing the text "Check with your company for specific plan information." appears above the graph.

Narrator: Let's take a look at a really simple example.

Onscreen text:
Let's take a look at a really simple example.

Narrator: Say you begin setting aside $300 from every paycheck on your company's Offering Date, and that the stock price on that day was $150. At the end of the Offering Period, on the Purchase Date, the stock price has gone up to $160.

The text "Offering Date" appears, and a line emerges upward to a circle containing cash. The text demonstrates that the viewer contributes $300 from each paycheck when the stock price is $150. A line graph of the company stock price increases from $150 at the Offering Date to $160 by the Purchase Date.

Narrator: Let's say your company offers a 15% discount. The lower of the two stock prices is $150 minus the 15% discount, which gives you a purchase price of $127.50.

Circles appear, visually demonstrating the narrator's explanation.

Narrator: In this case, the stock price on the purchase date, $160, is higher than the original discounted price you locked in, $127.50. This means that the $32.50 difference is the gain you earn per share.

The line graph representing the company's stock price reappears with the upward trajectory, visually demonstrating the narrator's explanation.

Narrator: This example is of course hypothetical. Be sure to check with your company for specific information.

A blue box containing the text "This example is hypothetical. Check with your company for specific information ." appears above the graph.

Narrator: Remember: Your Schwab account is your destination for viewing and managing your awards. Just log in and click on Equity Awards.

Onscreen text:
Remember: Your Schwab account is your destination for viewing and managing your awards. Just log in and click on Equity Awards.

Narrator: Still have questions? Give us a call.

Onscreen text:
Still have questions?
To talk to a Schwab Stock Plan Specialist, call 800-654-2593.
International participants, call +1-602-355-3408.

Narrator: Or, from your Schwab account, navigate to Equity Awards and click on Knowledge Center.

Onscreen text:
Or from your Schwab account, navigate to Equity Awards and click on Knowledge Center.

The Charles Schwab logo appears. Schwab brand music plays.

Onscreen text:
Own your tomorrow®

For illustrative purposes only. Individual situations will vary.

This information provided here is for general informational purposes only, and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, you should consult with a qualified tax advisor, CPA, Financial Planner, or Investment Manager.

Schwab Stock Plan Services provides equity compensation plan services and other financial services to corporations and executives through Charles Schwab & Co., Inc. ("Schwab"). Schwab, a registered broker-dealer, offers brokerage and custody services to its customers. 

©2024 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. CC11794448 (1024-VUN4)

Light music plays throughout.

Onscreen text:
Employee Stock Purchase Plan:
How to Enroll

A white panel appears from the left side of the screen. This white panel stays throughout the video. On the right, we see a computer screen. On that screen is the Schwab Landing page and the account login header at the top is highlighted in blue.  

Narrator [off-screen]: During open enrollment, enroll in your company's ESPP by logging into your account at schwab.com

Onscreen text: Log into your account.

Narrator [off-screen]: From the Account Summary page, click Equity Awards.

Onscreen text: Click Equity Awards.

A screen showing account totals comes forward and the background darkens slightly. Then we see the screen for the dashboard.

Narrator [off-screen]: That brings you to the Equity Awards dashboard. Under notifications, click Enroll.  

Onscreen text: Click Enroll.

Narrator [off-screen]: A window will pop up where you can enter the percentage or dollar amount of your paycheck you want to contribute to your ESPP. Contribution amounts will vary by company.

Onscreen text: Enter contribution amount.

We see a screen pop up that shows text about contribution amounts. Behind it, the rest of the screen is darkened.

Narrator [off-screen]: Then, read and agree to the terms and click Enroll.

Onscreen text: Agree to terms and click enroll.

Narrator [off-screen]: A confirmation window will pop up letting you know you are enrolled.

A confirmation window pops up and the screen behind darkens slightly.

Onscreen text: Confirmation of enrollment.

Narrator [off-screen]: Once enrolled, you can change your contribution amount by clicking Manage ESPP from the dashboard of the Equity Awards Center.

Onscreen text: To change contribution amount, click Manage ESPP.

Narrator [off-screen]: Then click Change.

Onscreen text: Confirm change.

Screen scrolls to the bottom and a blue highlight circle covers the "Change" button.

Narrator [off-screen]: Enter the new amount you want to contribute and click update.

Onscreen text: Enter new amount and click Update. 
A blue box comes in from the right and says "Check your plan for specific details about changing your contributions."

Narrator [off-screen]: You can withdraw from the plan at any time. From the Manage ESPP link, click Withdraw.

Onscreen text: Click Withdraw.

A blue box comes in from the right and says "If you choose to withdraw, and had accumulated money during the offering period, that money will be refunded (without interest) as soon as possible."

A blue bar sweeps across the screen as it turns white.

Narrator [off-screen]: Still have questions? Give us a call.

Onscreen text:
Still have questions?
To talk to a Schwab Stock Plan Specialist, call 800-654-2593.
International participants, call +1-602-355-3408.

Narrator [off-screen]: Or, from your Schwab account, navigate to Equity Awards and click on Knowledge Center.

Onscreen text:
Or from your Schwab account, navigate to Equity Awards and click on Knowledge Center.

The Charles Schwab logo appears. Schwab brand music plays.

Onscreen text:
Own your tomorrow®

DISCLOSURE:

For illustrative purposes only. Individual situations will vary.

This information provided here is for general informational purposes only, and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, you should consult with a qualified tax advisor, CPA, Financial Planner, or Investment Manager.

Stock Plan Services provides equity compensation plan services and other financial services to corporations and executives through Charles Schwab & Co., Inc. ("Schwab"). Schwab, a registered broker-dealer, offers brokerage and custody services to its customers.

©2024 Charles Schwab & Co., Inc. ("Schwab"). All rights reserved. Member SIPC. CC11794448 (1024-VUUW)

Upbeat music plays throughout.

Onscreen text: Employee Stock Purchase Plan (ESPP): How U.S. Taxpayers Are Taxed

Female narrator: With an Employee Stock Purchase Plan, decisions you make about your shares affect your taxes.

A woman sits on a park bench and uses her laptop.

Narrator: You might be wondering things like, "Do I owe taxes on my shares? When do taxes come into play? Or what happens when I sell?"

Speech bubbles appear above her, with a question in each one.

Onscreen text: 
Do I owe taxes on my shares? When do taxes come into play? What happens when I sell?

The speech bubbles fade away.

Narrator: The taxes you owe will depend on . . .

The scene fades to a gray background and a calendar icon in a red circle appears next to a money icon, with a plus sign between the two icons.

Onscreen text:
Time + Profit or Loss

Narrator:  . . . how long you've held your shares and the profit you make or the loss you incur.

The two red circles move toward each other to form one circle with new text in it.

Onscreen text: 
Purchase Date: No taxes applied

Narrator: When you bought your shares at a discount using your ESPP contributions, there were no taxes applied at purchase.  

A line draws out from the bottom of the circle and comes to an icon of a certificate.

Narrator: When you do sell your shares, it's tax reportable. And there are two elements of taxes involved: ordinary income that's reported on your W2 and capital gains or losses.

Onscreen text: 
Sale of shares
Tax reportable:
Ordinary income
Capital gains or losses

Narrator: You'll also come across the terms "qualifying disposition" and "disqualifying disposition."

Two lines draw out from the sides of the certificate icon and end at circles, each with a term inside it.

Onscreen text:
Qualifying disposition
Disqualifying disposition

Between the two circles is a rectangular box with text inside it.

Onscreen text: 
You don't have to guess. Your ESPP shares will be labeled in the Equity Award Center.

An arrow on the left edge of the box points to the circle that says "Qualifying disposition."

Narrator: Your shares qualify for a favorable tax treatment . . .

An arrow on the right edge of the box points to the circle that says "Disqualifying disposition."

Narrator: . . . or disqualify, depending on how long you've held them.

The word "disposition" jumps forward briefly.

Narrator: The word "disposition" is just another way of saying you're selling—or disposing of—your shares.

A line extends down from the circle on the left to a box with a check mark and text in it. That circle and box become larger and move to the center of the screen.

Onscreen text: 
Meets both holding periods
Usually taxed more favorably

Narrator: A qualifying disposition is when shares are held for the length of both IRS-required holding periods and means, in most cases, they'll receive the more favorable tax treatment.

The view pans to the right where the circle that says "Disqualifying disposition" and a box with an "X" and copy in it comes into view.

Onscreen text: 
Does not meet both holding periods
Not taxed more favorably

Narrator: A disqualifying disposition is when shares are not held for the required holding periods and means they won't receive the more favorable tax treatment.

The view pans left, back to the circle and the box with a check mark and text in it. A line then extends down from the box to a timeline with a label above it. The timeline features four points in time: Offering date, Purchase date, Year 1, Year 2.

Onscreen text: 
Qualifying Disposition Holding Period
Offering date
Purchase date
Year 1
Year 2

Narrator: To be considered a qualifying disposition and receive favorable tax treatment, shares must meet two holding periods.

On the timeline, the dot above "Purchase date" turns red, the line from there to "Year 1" turns red, and then the dot above "Year 1" turns red.

Narrator: The day they're sold must be more than one year from the purchase date . . .

On the timeline, the dot above "Offering date" and the dot above "Year 2" turn red, and the full length of the line turns red.

Narrator: . . . and more than two years from the offering date. For more detailed information, refer to our ESPP tax guide at eac.schwab.com.

The timeline fades away and moves left as the screen pans to the right. A dotted red line with an arrow moves to the right across the screen until it reaches a white box with text in it.

Onscreen text: 
ESPP Tax Forms

Narrator: There are three tax forms related to your ESPP that you'll need when you file your taxes.

A line moves downward from the white box and splits into three lines, each leading to a box with an icon and text in it. Each icon has the name of a tax form on it and the source of the form below it.

Onscreen text: 
Form 3922 
from Schwab or your company

W-2
from your company

1099-B
from Schwab

Each icon becomes larger for a moment as it is described.

Narrator: You'll receive Form 3922 from Schwab or your company in the year you purchased ESPP shares. In the years you sell, your W2 will report the ordinary income information. And the 1099-B from Schwab reports all your sales, which you'll need to calculate any capital gains or losses.

The icons fade into the distance, and the woman on the park bench again comes into view. She is talking on her cellphone.

Narrator: There's a lot to consider in selling shares. Talking with a qualified tax professional will help you make decisions that are best for you.

A white screen with grey text slides in from the right.

Onscreen text: 
Still have questions? 
Find more information at eac.schwab.com.

Narrator: Still have questions? Visit the Equity Award Center for more tax resources.

Onscreen text: 
Still have questions? 
800-654-2593 
Monday through Friday, 24 hours a day.

Narrator: Or give us a call.

Upbeat music stops.

Brand music plays.

The Charles Schwab logo appears.

Onscreen text:
Own your tomorrow®

FOR GENERAL INFORMATIONAL PURPOSES ONLY.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, legal advisor, or investment manager.
Stock Plan Services provides equity compensation plan services and other financial services to corporations and employees through Charles Schwab & Co., Inc. ("Schwab"). Schwab, a registered broker-dealer, offers brokerage and custody services to its customers. 
©2024 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.  CC10230198 (0921-1ZHE)