IRS Postpones Stock Option Reporting Change

September 24, 2001 ( ? The Internal Revenue Service (IRS) has postponed the effective date of new reporting requirements on nonqualified stock option gains until 2003.

The extension was included in IRS Announcement 2001-92, which also provided instructions on the reporting.

Once effective, the mandatory reporting of compensation resulting from employer-provided non-statutory stock options will be designated in box 12 of the Form W-2 using Code V. However, the IRS noted that the previously mandated use of Code V is optional with respect to Forms W-2 issued for the year 2002.

Second Thoughts?

The IRS had issued a mandate to make the change in reporting last year in IRS Announcement 2000-97. Employers would have been required to report separately income from the exercise from nonqualified stock options. Currently that gain is aggregated with other income in boxes 1, 3 and 5 on Form W-2.

In response to employer concerns, Treasury and IRS officials responded earlier this year with Announcement 2001-7 that made such reporting optional for 2001 W-2 Forms and mandatory for 2002.

Speak Now, or Forever?

The current announcement also requests comments on cost-effective alternatives for collecting information regarding the amount of income from the exercise of NQSOs on both an aggregate and individual basis. If the comment process does not result in the development of cost-effective alternatives, the new reporting requirements will be mandatory in 2003.

Comments must be submitted by December 14, 2001. Comments should reference Announcement 2001-92 and be addressed to:

Internal Revenue Service

Tax Forms and Publications Division


1111 Constitution Ave., NW

Washington, DC 20224

You can read IRS Announcement 2001-92 at .