The Securities and Exchange Commission has adopted a final rule that eventually will shorten the standard settlement cycle for most broker-dealer securities transactions to one business day after the trade date (T+1) from two business days (T+2) . This rule could affect tax withholding and deposit rules for certain equity awards.

Under the IRS’ latest informal guidance, from Generic Legal Advice Memorandum 2020-004 in May 2020, withholding obligations for both federal income taxes and payroll taxes under the Federal Insurance Contribution Act for certain stock-settled equity awards arise on the day when the award either is exercised (in the case of stock options or stock-settled stock appreciation rights) or when the employer initiates payment of the award (in the case of restricted stock units). READ MORE