The IRS recently issued two forms (along with accompanying instructions) that corporations must use to satisfy the return and information statement requirements under Section 6039:
Previously, the IRS had waived the filing requirement and required delivery of a written information statement (on a form acceptable to a corporation) no later than January 31 of an applicable year. Beginning for ISO exercises and ESPP stock transfers during calendar year 2010, corporations must use the official Form 3921 and Form 3922 provided by the IRS. Only one transaction may be reported on each Form 3921 and Form 3922.
For ISO exercises and ESPP stock transfers which occurred in calendar year 2010, corporations must file with the IRS the completed Forms 3921 and Forms 3922 no later than February 28, 2011 for paper filers, and no later than March 31, 2011 for electronic filers. If a corporation will file 250 or more forms, electronic filing is required.
For ISO exercises and ESPP stock transfers that occurred in calendar year 2010, corporations must provide the employee (or former employee) the information statement (Copy B to the applicable Form) no later than January 31, 2011.
Corporations should order the official Form 3921 and Form 3922 from the IRS as soon as possible. Forms may be obtained by calling 1-800-TAX-FORM or ordering the forms online on the IRS website.
All Dispositions – The information statement and return requirements under Section 6039 are not dependent on whether the exercise or stock transfer are a qualifying or disqualifying disposition.
Non-Resident Aliens – A corporation is not required to file a return with respect to, or provide an information statement to, an employee who is a non-resident alien and to whom the corporation is not required to provide a Form W-2 for any calendar year beginning with the first day of the calendar year that the ISO or purchase right (typically the offering date for the offering period of the ESPP) was granted and the last day of the calendar year that the ISO was exercised or stock transfer occurred.
Non-Compliance - A penalty of $50 is imposed for each statement not timely furnished or containing incomplete or incorrect information (an intentional failure to report is subject to a greater penalty).
Important Note for Private Corporations - The IRS reporting requirements described above does not relieve a corporation from (I) its obligations to discuss with its employees the fair market value of common stock throughout the year to assist with estimated tax determinations for the exercise of an ISO, or (II) the necessity to value common stock delivered upon exercise of non-qualified stock options for withholding tax purposes.
For more information, you may contact any attorney in the Executive Compensation and Employee Benefits Group.
Scott P. Spector (650.335.7251–firstname.lastname@example.org)
Shawn E. Lampron (650.335.7642–email@example.com)
Blake W. Martell (650.335.7606–firstname.lastname@example.org)
John E. Ludlum (650.335.7872–email@example.com)
Gerald Audant (415.875.2362–firstname.lastname@example.org)
Elizabeth A. Gartland (415.875.2361–email@example.com)
Nicholas F. Frey (650.335.7882–firstname.lastname@example.org)
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