New IRS Proposed Regulations Under Section 6039.....Are you ready to file these new forms? Info and Deadlines Provided.
The Internal Revenue Service (IRS) has published proposed regulations under Section 6039 of the Internal Revenue Code that beginning with transactions in 2010, companies will be required to provide participants with Form 3921 for all Incentive Stock Option (ISO) exercises; and Form 3922 upon first transfer of legal title of shares acquired pursuant to an Employee Stock Purchase Plan (ESPP). In addition, companies will also be required to file these same forms with the IRS. For companies filing more than 250 forms of either the 3921 or 3922, the IRS requires that they file those forms electronically in the special file format specified in IRS Publication 1220.
My Equity Comp is proud to offer a solution to help companies meet these new regulations. My Equity Comp has a solution that will streamline both the participant and IRS reporting requirements. This solution will generate the required forms at the same time so auditing between the participant and IRS forms will be minimized. We can even mail the forms directly to the participants and electronically file the forms to the IRS on your behalf.
Deadlines:
January 31, 2011 Forms 3921 and 3922 to be delivered (postmarked) to employees
February 28, 2011 Physical Forms to be filed with IRS (less than 250 forms)
March 31, 2011 Electronic Forms to be filed with IRS (250 or more forms)
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What does "upon first transfer of legal title of shares acquired pursuant to an Employee Stock Purchase Plan (ESPP)" mean? Does it mean at the time when the shares are actually purchased as part of the espp program?
Thanks,
Mary White
Yes, it does refer to each purchase of ESPP shares. So, if you purchase quarterly, then you will be required to file 4 forms per employee (assuming they purchased in all 4 quarters).
Oh my goodness. Thank you for the clarification Cory!
I haven't seen a Form 3922, but I would hope it's one form per employee with the ESPP purchases aggregated. The purchase of the ESPP shares is the trigger when the shares will be held in "street name". If for some reason, the issuer is still issuing a certificate to the employee there will not have been a transfer of "legal title".
I haven't seen a Form 3922, but I would hope it's one form per employee with the ESPP purchases aggregated. The purchase of the ESPP shares is the trigger when the shares will be held in "street name". If for some reason, the issuer is still issuing a certificate to the employee there will not have been a transfer of "legal title".
In a recent SF NASPP chapter symposium, the attendees were informed you may prepare a single substitute statement listing the required fields for each purchase and send it to the participant. Whereas, the IRS will accept a single form 3922 summarizing all the activity (purchases) on one form for the year.
Suggessted review of the proposed instructions in IRS Publication 1220 and Electronic Filing requirements (if applicable) in IRS Regulation Sec. 31.6051(1)(j) and Rev Proc. 2009-30, p. 27 were offered before determining how to proceed.
If you are filing actual forms, you must issue one form per transfer to the employee as the forms are transfer specific and can only accommodate information for one transfer. You must also file one form per transfer to the IRS but when filing electronically to the IRS, all participant transfers will be included (line by line, transfer by transfer) in one file.
Final regs for the substitute forms have not been issued yet either but in theory, you will be able to consolidate all of the purchases onto one form (listed out transfer by transfer). And again for the file to the IRS, they will be listed out transfer by transfer as well for all participants.
Yes, if you are using the 'standard form' it will be one form per transfer for the participant statements. However, most of the clients we've spoken too are planning to use a substitute form and are planning to use a "composite" or "aggregate" approach - one form per participant with each purchase listed in the 'body" of the statement. Resulting in one page per participant and a much easier mailing process.
And just to clarify the response about "purchase" being the transaction that triggers the reporting requirement, that is true, but only for companies that deposit shares with a broker at the time of purchase. If you are issuing certificates or using some other method, the triggering transaction will not be your purchase. (When we spoke about this at the SF NASPP All-day meeting, there was one company in the room that still issues certificates.)
And on a side note, we are giving a webcast on Section 6039 and our solutions around it on Thursday at 11am PT.
Here is the registration link for anyone who would like to attend.
https://sosevents.webex.com/sosevents/onstage/g.php?t=a&d=665468004
Thanks for sharing! It was a very informative webinar!