2014 Deadline Approaches for Employee Stock Statements and Returns

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January 15, 2014 — 2,046 views  
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The IRC (Internal Revenue Code) now dictates that companies and employers give a written statement allowing employees and former employees to take part in trading stock options as per incentives or bonuses. The statement must be made directly to the employees, and should either state that they have exercised their right to an incentive stock option, or obtained share titles of the corporation.

The Basics of the Process

This rule applies to both public as well as private corporations, and be made by January 31, 2014. The IRS has made such rules so that employee benefits are properly registered and made available to each and every citizen. It would be common to see certain negligence in the field of providing stock options and share incentives from employer to employee. However, the new rule is bound to change that by making the presentation compulsory and in the form of a documented legal statement.

The Information Required by the IRS

The ISO has requested that all organizations provide the following information, and ensure that the follow the rules under Sections 422 and 423 of the ESPP so that there is no fraud taking place. The information requirements are basic, and are as follows:

-         The name of the employee, address, and the EID (employer identification number) of the employees of the organization that plans to transfer their shares over to employees.

-         The name of the employee, address, and the EID of the employees of the firm that plans to give out stock options rather than directly transfer shares.

-         Further details of the activities regarding the same of beneficiaries previous to the receiving employee.

-         The date on which the options and shares were granted.

-         A fair market representation of value of what was given to each employee in the firm. The fair price is only that which is net of things like inflation and devaluation of the shares and options.

-         The quantity (in number) of the shares provided to each individual to exercise incentive rights.

With these details, the IRS will be able to safely accommodate the changes and do thorough checks to ensure that there is no fraudulent action taking place. The new rule is putting pressure on employers because the deadline is nearly approaching, and as the dates get closer, the expectations of employees also increase.

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