If your company transferred shares to employees during 2013, then it likely faces a deadline for providing information to the employees by January 31, 2014 and to the Internal Revenue Service (IRS) by either February 28 or March 31, 2014.
Specifically, Internal Revenue Code (IRC) §6039 requires that companies which transfer shares of stock to employees on the exercise of Incentive Stock Options (ISO), created by IRC §422(b), or as part of an Employee Stock Purchase Plan (ESPP), created by IRC §423(c), must provide information statements to those employees and file information returns with the IRS.
Information Statement for Employees
Employers must provide employees with written statements about the details of the stock which they acquired in 2013 so that employees have a record of the tax basis of the stock and to help in calculating alternative minimum tax adjustments, if applicable. The deadline for providing these statements is January 31, 2014.
Information Return for IRS
Employers also must file information returns with the IRS: Form 3921, Exercise of an Incentive Stock Option Under Section 422(b); or Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c). The deadline for filing these returns is: February 28, 2014 for paper filing; or March 31, 2014 for electronic filing.
Required Information
The information a company must report to the employees and the IRS includes:
• Date the option was granted;
• Date the option was exercised;
• Exercise price per share
• Fair market value per share on the exercise date;
• Number of shares transferred;
• Fair market value per share on grant date (for ESPP only); and
• Date legal title transferred (for ESPP only).
For more information about the requirements of IRC §6039 or for assistance in completing the employee statements or IRS returns, we urge you to contact your tax advisor.
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