A Dow Jones news report said that the IRS currently has a moratorium on employer withholding of income and payroll taxes on incentive stock option and employee stock purchase plans until January 2003. By that time, officials hope to clarify regulations that affect these plans.
At present, in order to avoid having their employers withhold income tax on these plans, employees must hold stock for:
· two years from the date of purchase, for those in
employee stock purchase plans
· one year from the date they are exercised, for employees with incentive stock options.
Should the proposed law take effect, employers would still have to report the amount of stock sold and employees would still have to pay taxes on the on the sale of the stock, as is current law.