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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
Employers would be required, under proposed regulations, to provide greater information to the IRS and employees when a transfer of stock is made in connection with the exercise of an option through an employee stock purchase plan or through an incentive stock option program. The proposed regulations would amend regulations implementing Code Sec. 6039, as amended by the Tax Relief and Health Care Act of 2006 (P.L. 109-432).
Under Code Sec. 6039, corporate employers must provide an information return to the IRS and the employee when a transfer of stock is made in connection with the exercise of an option through an employee stock purchase plan under Code Sec. 423(c) , or through an incentive stock option program under Code Sec. 422(b. The proposed rules are intended to allow employees to calculate their tax liability when shares acquired through options are sold.
The main objective of the proposal is to insure that corporate employers provide employees with sufficient information to calculate the employees’ tax obligations when shares acquired through options are sold. To accomplish this, the amendments update the existing regulations governing the information statement provided to employees and add provisions detailing the return that must be filed with the IRS. Under the proposals, two new forms will be published in 2008:
- Form 3921, Exercise of an Incentive Stock Option Under Section 422(b), will be used for both the information return and the employee statement for stock options described in Code Sec. 422(b).
- Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c), will be used for all reporting requirements for transfers of stock acquired by exercising a Code Sec. 423(c) option.
Under the proposed regulations, essentially the same information would be reported with respect to the transfer of stock pursuant to the exercise of an incentive stock option and the transfer of stock acquired pursuant to an employee stock purchase plan. With respect to a transfer of stock upon the exercise of an incentive stock option, the information required to be furnished to employees pursuant to the existing regulations under Reg. §1.6039-1 is already sufficient to enable the employee to calculate his or her tax obligations upon disposition of the shares, according to the IRS.
However, with respect to an employee’s transfer of stock acquired under an employee stock purchase plan, the information required to be furnished to employees pursuant to the existing regulations is not sufficient to enable the employee to calculate his or her tax obligations upon disposition of the shares. Accordingly, the proposed regulations require that additional information be included in the information return and the statement furnished to employees.
Corporations are not required to comply with the information return requirements of amended Code Sec. 6039 for stock transfers that occur during the 2007 and 2008 calendar years (Notice 2008-8, see CCH Pension Plan Guide ¶17,138G ). However, corporations must furnish information statements to employees for such stock transfers and may rely on existing final regulations or the proposed regulations when providing the employee statements.
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