Compliance January 11, 2002

IRS Proposes Stock Option Regulations

November 13, 2001 (PLANSPONSOR.com) - Employers will not be required to withhold income tax from employees who sell company stock before the expiration of a holding period, according to new IRS proposed regulations.
Reported by

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.


 

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