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I've got some stock options with a company I used to work for and my intent is to purchase them and hold them for at least a year to take advantage of the long term gain (versus doing a same day sale or sell to cover). I'm trying to understand the reason why it is a requirement to pay witholding taxes on the shares at the time I purchase them versus when I sell them.

Also, if I pay witholding taxes now, come tax time how is it claimed on my 1040 if I haven't sold the shares?

Then when I finally sell, I assume I only pay the difference between the amount witheld and my real gain or loss.

This whole situation seems backward to me.

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