There’s been much buzz around the first round of CEO Pay Ratio disclosures, to occur beginning in the upcoming proxy season. While many companies are busily preparing for the disclosure itself, attention must also be given to other important tasks that stem from the disclosure – like preparing to communicate with the media, shareholders and internal employees.
According to a recent Willis Towers Watson poll, while most companies said employee reaction to the Pay Ratio disclosure is a concern, 48% of respondents said they had not taken any action to prepare for employee communications. Willis Towers Watson summarized their findings as follows:
“Despite the concern, nearly half (48%) of respondents haven’t considered how or even if they will communicate the pay ratio to employees. Only 14% have created a detailed communication plan to educate employees, and a similar number are not planning to say anything to employees. Just 16% are prepping managers to be able to discuss the results of their pay ratio with employees, although 39% are preparing leadership to respond to employees’ questions.
This gap between concern and communication comes as the SEC pay ratio disclosure rule’s implementation date in early 2018 quickly approaches.”
We are entering a time of year when many stock plan administrators and corporate compensation professionals spruce up their employee communications. There are year-end tax withholding and reporting communications, some companies provide communication around annual compensation, new benefits, and other information. Many companies may be thinking that they will communicate about the CEO Pay Ratio disclosure after the disclosure is made, if at all. May I suggest that now is the time to start laying the groundwork for those communications. If you’re already going to be communicating to employees about various aspects of their compensation and benefits, this is a prime opportunity to raise more awareness about what they have, why they have it, and the basis for their current compensation. Here are some ideas to consider in crafting a communication strategy around the disclosure (now is not too early to think about this!):
Use existing planned communications to include messaging about the CEO Pay Ratio before the disclosure.
Communicating pre-proxy filing is going to lend a key opportunity to share information about the basis and rationale for current pay before employees digest the actual CEO Pay Ratio figures. Education about existing compensation and corporate compensation philosophies ahead of time could aid in providing the employee the means to better understand why they may fall above or below the median, rather than leaving it to “surprise” them and filling an information void with imagination or assumption. Additionally, employees will have access to data about peer companies at the same time you do, likely well before you have time to craft further communications post-disclosure. Without a foundation of information and understanding in place to foster a belief that their current pay is fair, employees may be more likely to perceive differences to peer companies as negative.
Plan for post disclosure communications that will incorporate comparisons with other companies into your broader pay story.
You won’t know about the ratio of peer companies until after the disclosures are made. Once you have that information in hand, it will be time integrate that information into your own messaging to employees. Pay is most often not just about dollars in a paycheck and employees will need to hear more about about what makes their pay package fair compared to peer companies that may have different CEO Pay Ratios. Is there a large equity component? Does your company’s ESPP discount stand out above other companies? Are there other benefits that need to be considered in understanding the overall package – including the parts not incorporated into the Pay Ratio calculation?
With year-end communications on the horizon, this is a great opportunity to integrate messaging that will help employees understand their bigger compensation picture.
It’s a slow news day here at the NASPP. I don’t have anything pressing to blog about so I thought it would be a good time for a poll. Below are a few questions that were recently posted to the NASPP Q&A Discussion Forum that are largely unanswered at the moment. If they apply to you, please take a moment to indicate your answers so we can help these folks out. Thanks for indulging me!
If you can’t see the poll below, click here to participate in it. As always, if you are a contractor that works with multiple clients, please answer for just one of your clients (preferably one that won’t otherwise complete this poll).
In today’s blog I want to draw attention to some of the other skills you may need to hone in order to be the best version of your stock plan self. For just a moment, I’m not talking about the laws and regulations you need to remember, or the best practices, or the intricate processes. I’m focused on completing the whole you (no, not in the “you complete me” Jerry Maguire form), from a stock plan sense.
4 Skills to Strengthen Your Brand
It’s easy to get caught up in trying to figure out how to tax a performance award in France or withhold supplemental income on a U.S. stock option exercise. Perhaps a part of our mental cycle even wonders if IFRS 2 is coming (or not) and what should be done to prepare. We spend significant time figuring out “things” and solving challenges. From an expertise perspective, that is fantastic and necessary experience. Just for today, though, I want to shift our thinking into contemplating what other skills might be needed to ensure you are the best stock plan professional you can be. On that note, I’ll share 4 areas where you can round out your skills and stand out from the crowd.
1. Enhance Your Writing Skills: Chances are you have to write employee communications, process documents and exchange emails back and forth with your internal business partners, participant population, and senior management. Nothing stands out more than communications that are overdone, underdone, or just plain confusing. One trick I use when writing a communication is to review it and cross out words that are not “necessary” to the sentence.
For example, instead of saying:
“For more information, please feel free to visit our stock plan intranet site, located in the XYZ portal on our company website.”
Consider saying: “More information can be found in the XYZ portal on our website.”
There’s nothing wrong with the first sentence, except that it’s a bit long and wordy. Too many of those in a row can lose the reader’s interest.
2. Refine Your Grammar: Here’s a question for you: In the U.S., do periods and commas go inside or outside of quotation marks?
Mary said “I like your stock plan process guide.”
OR
Mary said “I like your stock plan process guide”.
If you answered “inside,” then you are on your way to becoming grammar guru. Sub optimal grammar skills can weaken your credibility and the ability for others to depend on you. You may only get one chance at your message and it needs to be polished. One of my favorite outside resources to help with the quick or tough grammar question is Grammar Girl. In the middle of writing something? You can look up pretty much any grammar question you may have.
3. Polish Your Presentation Skills: Whether you are talking to your employees, to other stock plan professionals, or another audience, you’ll want your message to be received in a way that engages the recipient. This is an area where there is so much opportunity to share your message and build your brand. If you have a knack for articulating valuable information, that will help to establish you as an expert in your subject matter. A couple of quick tips to get started:
Record yourself doing a presentation. This can be done on your smartphone, computer, tablet or any device with a microphone. Listen to how you present. If you are using lots of “uhs and ahs” or have other little “ticks”, figure out how to obliterate them from your presentation vocabulary.
Use stories. Nothing engages an audience more than a great story. Whatever material you have to present, be sure to have plenty of story examples to add color and interest.
4. Plan Your Career Path: Surprisingly, many of us land in stock compensation but don’t plan our navigation from there. The industry is comprised of many moving parts, ranging from issuers, to service providers, to consultants. What’s your ultimate path? I recommend thinking about what skills and experience you may need to acquire along the way and develop goals to get there. Will you need to specialize in something in order to gain the expertise that will give you credibility down the road? Next week we have a great webcast planned on Finding the Right Job in Equity Compensation. In full disclosure, I’m a panelist on that webcast. Let me just say that you won’t want to miss it – there will be tons of information on how to build a career path and your personal brand in this industry.
It’s easy to get caught up in the day to day and forget about the other, softer skills that can make a difference in reaching our full potential. Even if you can’t work on them all right now, pick one to refine and help increase your value as a stock plan professional.
It’s that time of the year again…actually, I wonder how many times during each year we say that…(“it’s that time of the year…time for year-end”, “it’s that time of the year…time for 6039 reporting”, “it’s that time of the year…proxy time”). Ah, but I digress. The time of the year I’m talking about today is “tax time”. I just finished compiling a mountain of paperwork and explanations for my accountant and was painfully reminded of just how much paperwork we do receive in preparation for our tax returns. I started to wonder – are your employees lining up at your doorway with questions? Have your communications been sufficient to anticipate and address their likely questions? In today’s blog I explore some of the key misconceptions that employees develop at tax time when it comes to reporting their stock transactions.
Employee Misconceptions
Thinking that restricted stock unit/awards been reported and taxed based upon the sale of shares. If you don’t believe me, just visit Turbo Tax’s question forums. Employees are out there complaining that the sale has not been properly recorded on their W-2. This points to needing clearer communication about what exactly gets recorded on the W-2, and there the company’s obligation to report stops.
Assuming all cost basis information for stock plan shares is recorded on the new 1099-B. Since this is a fairly new reporting requirement, and the rules only apply to stock that was acquired in 2011 or later, it’s a common possibility that not all transactions will have accurate cost basis information on the 1099-B. Employees need to be able to distinguish between transactions and know exactly what the broker is reporting. The 1099-B originates from the broker, so stock administrators should be aware of how the broker is explaining this to employees. Even though issuers aren’t tasked with preparing these forms, you’re likely to get questions about them. Sometimes a simple factual reminder that “anything before 2011 may not be on there” can go miles to clearing up confusion.
Not understanding which ESPP dispositions are recorded on their Form W-2. In theory employers should be recording both qualified and disqualified dispositions for Section 423 plans on the employee’s W-2. The reality is not all employers report qualified dispositions. The employee will get a Form 3922 from the company for the year of the purchase, and then a 1099-B from the broker for subsequent sales. Those are important pieces of information, but also of importance is the portion of income recorded on the W-2. If employees fail to recognize the W-2 component, they run the risk of paying double taxes.
There are many mistakes and assumptions that employees can make in preparing their tax returns. These misconceptions or misunderstandings can vary by employee level of understanding, advice received from advisers and other factors. Stock administrators can mitigate some of these misconceptions by anticipating common areas of assumption and developing an FAQ to proactively head off or clarify areas of question. You may not be tax advisers, but you can certainly help employees to avoid a mountain of misunderstanding, leading to costly mistakes during tax time. For sample communications and other ideas, visit our Tax Withholding and Reporting Portal.
As my readers know, cost-basis reporting went into effect last year for Forms 1099-B. This resulted in a number of changes to Form 1099-B, introduced Form 8949 to the stock plan administration lexicon, and created a whole new “opportunity” for employee education.
If you were thinking we were done with this topic–think again! This year, the IRS has further revised Form 1099-B and also changed Form 8949–finally issuing instructions to the new Form 8949 just last week. Any educational materials you may have created last year will likely need to be updated. The examples, FAQs, and flow charts in the NASPP’s Cost Basis Portal have all been updated for the new forms and instructions (now you know what I did this weekend).
New boxes 1d and 1e report the stock symbol and number of shares sold. There is still a description box (now box 8, formerly box 9 in 2011) where this information also appears.
Former box 2 (sales price) is now box 2a. This makes room for new box 2b, which has something to do with losses that are disallowed for reasons I don’t understand. Something about acquisitions/changes in corporate structure and foreign corporations–I’m pretty sure it doesn’t have anything to with stock compensation.
Former box 8 (short- or long-term gain) is now box 1c.
Box 6 now has two checkboxes: a) for noncovered securities, and b) indicates that the basis was reported to the IRS. Presumably the IRS can figure out whether or not the basis was reported to them, so I assume that box 6b is there to confirm for employees (and their tax preparers) that the basis was (or was not) reported to the IRS (e.g., if the broker reported the basis on the substitute Form 1099-B issued to the employee but didn’t report the basis to the IRS, box 6b would not be checked).
A bunch of other boxes that I don’t care about were renumbered.
Former column (b) (adjustment code) is now column (f). This also means that former columns (c) through (f) have all shifted to the left and are now columns (b) through (e). I guess it makes sense to have the adjustment code next to the adjustment column, but I do kinda wish the IRS had thought of this when they first created the form–it took a long time to update all the column references.
New column (h) now shows the taxpayer’s gain or loss for each transaction. Last year, gains/losses were only shown in aggregate on Schedule D.
Where the cost basis is reported to the IRS, new code “E” is entered in column (f) when the transaction fees are not reflected in either the sale proceeds or the cost basis reported on Form 1099-B (an adjustment in the amount of the fees is also entered in column (g)).
If the employee’s copy of Form 1099-B (or substitute) reports an incorrect basis and that basis was not reported to the IRS (indicated in new box 6b of Form 1099-B), the employee should report the correct basis in column (e) of Form 8949 but should also report code “B” in column (f), even though no adjustment will be entered in column (g). I’m not sure why the IRS wants taxpayers to enter an adjustment code when there’s no adjustment. It’s the IRS; go figure…
If multiple codes are entered in column (f), they should not be separated by a space or comma. Last year, they were supposed to be separated by a space or comma. Seriously? Ok, now it seems like the IRS is just changing things to change them–that’s just rude.
Some Things You Can Still Count On
The good news is that there have been no changes to Forms 3921 and 3922 (or maybe that’s bad news if there’s something you were hoping the IRS would change about them). Also, tax preference income for ISO exercises is still reported on line 14 of Form 6251 (for all I know, the whole rest of Form 6251 has changed, but at least line 14 is still the same). I feel a little better now.
A Great Resource for Employees
A shout-out to Bruce Brumberg of myStockOptions.com for letting me know that the IRS had issued new instructions to Form 8949 and for giving me a quick run-down of the changes. If your employees have questions about the tax treatment of their stock compensation, myStockOptions.com is a great resource for them. The myStockOptions Tax Center has oodles of resources on reporting stock plan transactions on tax returns, even a free video on this topic.
This week, we feature another installment in our series of guest blog entries by NASPP Conference speakers. Today’s entry is written by Bill Dillhoefer of Net Worth Strategies, who will lead the session “Supercharging Your Stock Option Grants.” 10 pts to Bill for successfully using the word “quants” in his entry!
My company has been providing equity compensation decision support services since 1999 so we have witnessed firsthand a great deal of the development in stock plan participant education. Here’s a brief summary…. The internet bubble (1995 – 2000) instigated many companies to begin offering broad-based employee stock option programs. These companies had to provide participants with basic information about their stock option grants because options were new and mysterious. This was the “Options 101” phase because these communication programs generally avoided the more complex aspects of stock options.
This early phase of participant education may have transitioned into one that addressed advanced topics had it not been for two major factors. First, the internet bubble burst, causing the appeal of stock options to decline because underwater grants were perceived as worthless. Second was the adoption of FAS 123(R), which eventually resulted in the curtailment of broad-based option programs and the increase in popularity of restricted stock/units. Consequently, the adoption of advanced stock option education programs never gained popularity among issuing companies.
Nevertheless, stock options are still a widely used means of granting equity to valued employees. Even if your company isn’t currently granting new stock options, if your employees have outstanding options grants you can significantly increase their perceived value. It is often said that “perception is reality” so by simply educating participants on the Black Scholes value of their grants, this value become a reality. Now you are probably thinking this is crazy because Black Scholes is WAY over their heads and will only serve to confuse and discourage people. On the contrary, learn the secrets and benefits of providing employees with Black Scholes based information by attending “Supercharging Your Stock Option Grants” at the 20th Annual NASPP Conference.
This presentation consists of four sections. Professor Anne Farrell will present academic research showing that individuals misunderstand the full value of their employee stock options and how basic training can significantly change their subjective valuations. Next, I will introduce two time value based metrics: Forfeit Value and the Insight Ratio. These metrics can be incorporated into stock option communication programs and can increase retention and motivation by helping employees make informed decisions. In the third section, Clinton Shoap from Cargill, Inc. will provide examples of how they have successfully used time value information with their employees. Finally, Larry Bohrer from Charles Schwab will describe their approach to helping companies to realize the full potential of their option awards and how complicated concepts can be understood by participants when presented in the right framework.
Who says Black Scholes is only for quants? Delivered in the right manner Black Scholes information can be fun and profitable for employees with stock options. “Supercharging Your Stock Option Grants” should not be missed.
Let’s face it: we live in an era of information abundance. Yes, I can remember the days when I had to go to the library to research something on a microfilm. If you mention the word “microfilm” to kids today, all you’ll get is a blank, puzzled stare in return (really, try it!). In recent years I’ve started to realize that we have access to so much information, that at times it seems like too much information (“TMI”). I think it hit me when my children’s pediatrician told me to stop googling (yes, googling is officially a verb) every little symptom. Why? Because there is so much information out there it’s hard to validate and assign credibility to what you read online. The term “TMI” isn’t in the Merriam-Webster Dictionary, but I did find it in the Online Slang Dictionary, so it appears that acronym may be here to stay.
What does my rambling have to do with stock compensation? This blog was prompted by an article across my Google alerts last week that referenced ESPPs. The piece in question was published by a reputable news agency, and yet I found misleading and inaccurate information about the mechanics of how ESPPs work. This prompted me to think about what our employee populations must be googling about their benefit plans, and even more concerning, what they are relying on as “truth”. For example, in the article titled “5 Ways to Increase Your Net Worth” and published by U.S. News & World Report, the author says: “ESPPs allow employees to withhold a portion of their paycheck to purchase company stock at a discount. Once purchased, you can usually sell your shares for a guaranteed return.” Last time I checked, there is no “guaranteed” return for an ESPP plan. Now, I think the author probably meant to say that there is a guaranteed formula for the purchase price (in terms of discount applied and/or look back), but that doesn’t solidify a certain dollar return upon sale. We’ve all seen the scenario where an ESPP purchase occurs one day and the stock price drops immediately, before the employee can even sell. It’s misleading to suggest that there is a guaranteed return, even though the publicity for ESPPs is great and the author is trying to highlight the benefits of such a plan. I’m concerned about an employee who reads a statement like this, signs up for the ESPP, and then expects a certain sale price down the road. Yes, the employee should verify the plan mechanics before joining, but we all know that employees often need assistance in getting the facts straight.
What Else is Out There?
A quick web search led me to several other inaccurate statements, and I’m sure there must be more out there. Here are a couple of samples:
– “Most startup employees don’t realize that it’s possible to ask to “forward exercise” their unvested options immediately after receiving their options grant.” This article makes no mention of needing to consult plan/grant documents and company policy to determine if early exercise is, in fact, permitted.
–“…the IRS considers this exercise a taxable event under the Alternative Minimum Tax because they just got something that’s worth more than what they spent on it.” This article does not identify the type of stock options that are being exercised, or explain that only ISOs are considered for AMT purposes (not non-qualified stock options). Imagine if an employee holding NQSOs read this article and assumes their exercise will trigger AMT.
I’m sure the list could go on and on as we explore the web and the information about there about stock plans. This further highlights that our need to communicate directly with stock plan participants is greater than ever before. It’s not only about informing them about the mechanics of their stock grants/awards. It’s also about being a direct resource to the employee and mitigating against the mis-truths they may find if they go hunting themselves. Make no mistake: if you fail to communicate with employees they will fill in the blanks on their own, and that’s a scary reality when it comes to stock plans and their complex layers. I list a few things you can do to ensure employees are receiving quality information:
Do communicate thoroughly about the terms and conditions of their grants/awards.
Do inform employees about the pitfalls of relying on online information; encourage them to validate information with you or your service provider before taking action based on something they read online. Even if you can’t give them official guidance, you can point them to other resources.
Do highlight reputable resources to obtain further information, such as myStockOptions.com, and/or a knowledgeable tax or financial adviser (emphasis on knowledgeable).
Don’t let random web articles be the sole source of information that your employees use to make sense of their stock plans. Some online content can certainly be a great supplement, especially from a credible source, but it’s in that context you want participants educating themselves online. The first and primary source of information should be the company. If you’re not communicating regularly, hopefully I’ve highlighted a few reasons to start. A great first step would be to visit our Employee Communications portal for sample documents and other valuable information.
Jenn’s on vacation, so I’m blogging twice this week. Since I get an extra entry, I thought I’d focus on one of my favorite topics: why the stock plan administration team should be using focus groups.
Is Your Stock Plan Out of Focus?
A focus group is a small group of employees that give you feedback on your stock programs. It provides a structured mechanism by which you can learn a lot about how employees perceive the company’s stock programs and the education around those programs. And it costs virtually nothing to implement–other than a little time from you and the group participants. Focus groups are one of cheapest yet most effective strategies you can use to improve your stock programs.
Once you start to think about it, I think you’ll realize that there are many aspects of stock plan administration where a focus group could be very helpful. Here are a few ideas to get you started:
Employee Education: A focus group can give you preliminary feedback on any educational materials you create. Do the materials make sense? Do they raise additional questions that aren’t answered? Do employees respond positively to the message? I think that just about every employee communication you distribute and every presentation you do should be run past your focus group first.
Plan Design: Test out new plan designs with the focus group to find out what works and what doesn’t work–before you’ve made a significant investment.
Put an Ear to the Ground: Your focus group can give you a feel for what employees are saying about the company’s stock plans.
Be Prepared: By testing new programs and educational materials with your focus group, you’ll get a feel for how these strategies will be perceived by employees. You won’t be caught off-guard during the official roll-out and you can be proactive about addressing questions and negative comments.
Turn Naysayers Into Cheerleaders: One effective way to silence your critics is to bring them into the process and make them responsible for helping to improve the program.
Who Should be in the Focus Group?
Probably somewhere around 20 people is about the right for the size of the group, depending on the size and diversity of your overall employee population. You don’t want it to be so large that it is unwieldy but you need it to be large enough that you get a representative sample of employee opinions. Also, remember that not everyone will participate in every opportunity to provide feedback, so you want the group to be a little larger than the number of active participants you hope to have.
Here are few thoughts on who to invite to be a part of the group:
Employees that are particularly outspoken or that have demonstrated a strong interest in and/or understanding of the stock program.
Employees that show leadership and won’t be afraid to speak up. Ask department managers for suggestions.
Make sure a wide range of departments and job levels are represented.
Of course, it goes without saying that you should only invite employees that are eligible to participate in the stock plan. If you have multiple plans with differing eligibility criteria, you may need multiple focus groups (e.g., one focus group for the all-employee ESPP and a different focus group for the RSU program that is only offered to managers and above). It also might make sense to have regional focus groups (e.g., a US group and a separate group for EU employees).
Rotate employees in and out of the group regularly–no one should serve for more than year.
Finally, avoid the temptation to pad the focus group with your friends. For one thing, your friends probably don’t need a special, structured program to help them provide feedback to you; they already know where to find you. But also, your friends may not feel comfortable giving you the open, honest feedback that you need.
In my very first NASPP blog, I chose a topic that was particularly passionate for me: employee communications. I like all the aspects of communicating with employees about their stock plan benefits. I recently came across an article that touched on an interesting fact: most people who achieve “millionaire” status (from stock options, lottery wins, working hard for a long time, inheritance, and several other ways to obtain a large sum of cash) don’t maintain that status for long. In fact, an analysis of IRS data on millionaires revealed that between 1999 and 2007, 50% of millionaires only stayed so for one year, and at the end of the 9 tax years, only 6% of those who were millionaires back in 1999 remained millionaires.
I know you’re just to the point of asking what an analysis of millionaires has to do with employee communications. I’ll get to that in just a minute. Back to the millionaire analysis – it struck me that many people work so hard to make money, and I was floored to see that so many fell off the millionaire bandwagon so quickly after achieving that status.
This data didn’t parse down executives vs. mid and lower level employees within organizations – this was an analysis of all millionaires filing tax returns in the U.S. during that period. However, if we were to look at organizations, I’d be willing to bet the amount of downfall from millionaire status incrementally increases the lower you go within the organization (my opinion only, I have no facts to back this up). Regardless, I began thinking about how we spend so much time putting together stock plans, educating employees on the mechanics of the plans, and even in some cases providing tools that allow employees to “model” future outcomes. I’m guessing many employees plug in some high stock prices and start dreaming about a windfall of cash. That raises a question from me: why do we spend so much time preparing, maintaining, and generally communicating about stock plans if the windfall is going to be so temporary? Yes, of course we don’t have control over what the employee will do with the money – certainly responsibility for squandering a chunk of it would fall squarely on the employee’s shoulders. But for those who are offering broad based stock plans, I ask the question – should more be done to help employees manage their rewards, or at least direct them to resources that can help them do so? As a communicator, I sometimes am frustrated that companies generally are advised to stand squarely outside the realm of “financial advice.” I realize most organizations don’t have trained financial planners, so an edict to stay clear of advice seems appropriate. However, there must be a way to offer a more integrated communication program to employees. Perhaps this type of communication can occur closer to the timing of a stock option exercise or large restricted stock vesting.
I know there are many firms that provide a wealth of stock plan services, including financial planning. Many issuer firms rely on these companies to assist in the financial planning arena, and employees seem to find this of benefit. As a communications nut, I would love to see more evolution in employer messaging, with increased talk about the full gamete of resources available to help employees manage the full life cycle of their stock plan grants and awards, which includes the financial planning component. I’m not suggesting that companies offer financial advice – but we tend to stay away from mentioning these resources in our communications like it’s a taboo topic. We highlight all the tools that will help employees imagine wealth (calculators, modeling scenarios, etc.). Why not pay some attention to what happens when they really do receive a windfall? After all, companies are giving the benefits to employees – shouldn’t we also help them figure out how to handle the upside?
I threw in a poll, because I want to know how you feel about companies taking steps to offer more communications on the financial planning resources that may be available to stock plan participants.
As our faithful readers know (because we’ve certainly harped on this topic enough), 2011 Forms 1099-B (which brokers will be sending out shortly) are subject to the new cost-basis reporting requirements. We’ve posted some resources to help you understand the new requirements and help you get a start on materials explaining them to your stock plan participants. In today’s blog entry, I highlight the new (and a few old) materials now available on Naspp.com.
Reporting Examples
We’ve created the following reporting reporting examples. Each example includes an annotated Form 1099-B, Form 8949, and Schedule D so you can see how sales of shares acquired under the various scenarios will appear on each of these forms:
We’ve also posted a sample FAQ on the new cost-basis reporting requirements and the new Form 8949. It even includes an annotated Form 8949. Use this as a starting point for your own FAQ for your stock plan participants.
We’ve also posted a sample email that might be sent to employees to alert them to the dangers of not verifying that the cost basis reported on their Form 1099-B is correct.
Flow Charts
Last year, we created the renowned Section 6039 flow charts (one member told us these charts alone made membership worth the cost), which explain how employees can use Forms 3921 and 3922 to report sales of shares acquired under ISOs and ESPPs on their tax returns. Those flow charts have now been updated for the new Form 1099-B and Form 8949. In addition, we’ve created flow charts for NQSOs and RS/RSUs.
For your employees, myStockOptions.com is a great resource, offering illustrated and annotated tax forms, FAQs, and numerous articles on how employees should report sales of stock on their tax return.
NASPP “To Do” List We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog.