Action May Be Required
Corporations, both publicly and privately held, that transferred stock in 2013 pursuant to the exercise of incentive stock options (ISOs) are required to report the transfer to both the IRS and the exercising person.
Form 3921 Exercise of an Incentive Stock option Under Section 422(b) is used for both purposes. Form 3921 requires the corporation to furnish certain information regarding the exercise, including the fair market value of the share of stock on the date the ISO was exercised. Corporations must furnish Form 3921 to the exercising person on or before January 31, 2104 and to the IRS on or before February 28, 2014 (March 31, 2014, if forms are filed electronically). In general, failure to furnish statements in a timely manner, failure to include all required information or the inclusion of incorrect information will result in the imposition of penalties.
Transfers of stock under an employee stock purchase plan (ESPP) are also subject to similar reporting requirements.
Morse, Barnes-Brown & Pendleton would be pleased to assist you in understanding and complying with these ISO and ESPP reporting obligations. Please feel free to contact Robert Finkel or Diana Española with any questions or call 781-622-5930.
To ensure compliance with U.S. Treasury Regulations governing tax practice, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.