January 23, 2018
Section 6039 Reminders
I thought I was going to be blogging about the government shutdown today but since it’s business as usual in DC as of last night, I’m off the hook on that topic, at least for a few weeks. Instead, I have a few Section 6039 reminders for you, seeing that the participant statement deadline is fast approaching.
Let’s Review
As you know, under Section 6039, companies are required to file returns with the IRS and issue participant statements for transactions under ISOs and ESPPs. For ISOs, the reporting obligation is triggered upon exercise and is fulfilled using Form 3921. For ESPPs, the reporting obligation is triggered by the first transfer of legal title of the shares and is fulfilled using Form 3922. If the shares acquired under an ESPP are deposited into an account at the company’s designated broker, the purchase is considered to be the first transfer of legal title.
Deadlines
Here are the deadlines for this year:
- Information statements must be distributed to employees by January 31
- Returns filed on paper must be filed by February 28
- Returns filed electronically must be filed by April 2 (because March 31 is a Saturday)
Paper or Electronic?
You must file electronically if you have more than 250 returns to file and anyone can file electronically voluntarily to take advantage of the extended deadline available to electronic filers. If you have more than five returns to file, I recommend going electronic; there are solutions that are priced reasonably for companies with only a handful of returns to file (email me if you need a list).
Check Your TINs
Make sure employees’ tax identification numbers are correct. The IRS is for sure going to check them but they won’t get around to it until well after the filing deadline, when the correction will be subject to the maximum late filing fee. Consider using an TIN matching service before filing your returns. (Thanks to My Equity Comp for this tip!)
What’s Up with Form 3921?
Kim Diemer of Take Stock brought to my attention that, although the IRS updated Form 3921 this year, the new paper version of the form is not yet available from the IRS. If you file electronically, this doesn’t effect you, as the information in the form and the specifications for the electronic file haven’t changed. The only change was to make copies B, C, and D fill-in forms in the PDF.
If you file on paper, the delay in availability of the forms could be a problem. The thing about filing on paper is that you can’t just print the forms from the IRS website, fill them in, and then drop them in the mail. You have to order the official paper forms from the IRS. Failure to receive the forms from the IRS does not relieve you of the obligation to file the returns by February 28.
At the moment, you’ve still got some time on this. You don’t need the official paper forms for the participant statements that are due by January 31; you can just download the form from the IRS website, fill out the appropriate copies, and distribute them to the appropriate parties. Or you can create a substitute statements (see the NASPP article “Figuring out Section 6039 Filings” for more information on this).
If February 28 nears and you still haven’t received the forms from the IRS, you can use Form 8809 to request a 30-day extension. If Form 8809 is submitted electronically (via the IRS FIRE system), the extension is automatic (handy if the government is shut down when you submit your request). You can request the extension electronically even if you are filing the forms on paper.
Alternatively, you could file the forms electronically (see note above about affordable solutions). Note that if the government does shut down after February 8 (the date the government is currently funded through), this may affect the IRS’s ability to provide the new forms. The IRS isn’t expected to extend the filing deadline in the event of a shutdown, so keep an eye on this and if a shutdown happens, be prepared with a backup plan.
More Information
Check out the following articles for more info on Section 6039 filings:
– Barbara