If part of your compensation package includes access to an Employee Stock Purchase Plan (ESPP), it could provide you with an easy way to purchase company stock at a discount. While this may give you an opportunity to build your wealth, the tax rules associated with ESPPs may introduce unintended consequences.

There are a variety of ways that companies can attract and keep employees. Whether through leave options and other paid time-off perks, extensive health care coverage, or the ability to work remotely, companies have no shortage of benefits to offer to stand out from the crowd when attracting talent. For highly compensated employees or employees of startups, you may also be offered compensatory benefits like equity compensation.

Many companies include stock options in employee compensation packages, and if you’ve been offered stock options as part of a compensation package, it’s important to understand the types of options you are being offered. We'll cover some key mistakes to avoid when exercising non-qualified stock options (NSOs), termed “non-qualified” because they do not meet all of the IRS requirements to be deemed incentive stock options (ISOs).