At the CEP Symposium later this month, I am part of a panel that will present on social media strategies that we can leverage in stock plan education programs. Recently, one of my co-panelists, Emily Cervino of Fidelity Stock Plan Services, wrote an article about this topic. I’m so excited about this idea that I asked Emily if we could publish her article as a guest blog entry.
3 Social Media Tricks to Make Stock-Plan Communications Irresistible
By Emily Cervino, Fidelity Stock Plan Services
Did you click on this article because, surely, you have the time to read just three things? And who doesn’t want “irresistible” communications? A quick read could make you a certified hero at work!
I hope you found the title catchy, compelling, and irresistible, because that was my intention. The title is my attempt at “clickbait”—a title that tempts you with information you need and want—but that you have to click to get. The main purpose of clickbait is to attract attention—simply by getting readers to click on it.
I’m gearing up for the CEP Symposium, where I’ll join Aftab Ibrahim, T-Mobile, and Barbara Baksa, NASPP, for a session on using social media tricks to make stock plan communications compelling. No, we aren’t talking about using actual social media for stock plan communications—that’s a no-go from the get-go for many companies. But we are interested in taking the tricks that make social media so addictive and applying them to stock plan communications.
If you are reading this article, you’re on social media and I’d wager that this isn’t your first foray into social media today. I can’t honestly say that I check social media every morning before I get out of bed, but it is a safe bet that by the time I’m done with my 2 minutes of teeth brushing (as recommended by the ADA) I’ve peeked at social media. Sometimes I brush even longer because, you know, one thing leads to another and I clicked here and then there, and then there’s a 30-second video I just have to finish!
Imagine a world where your employees eagerly gobble up your communications, clicking on videos and racing from article to article to absorb the nuggets of stock plan wisdom. Envision employees gathered in the break room sharing ESPP videos on their phone screens. And, treat yourself to the thought that employees look forward to this stuff, rather than approach it with the same enthusiasm as completing their tax return. It isn’t that outlandish. There are some simple, easy things that you can do. While you can go all out with expensive and custom work, there are a number of impactful changes—surefire tricks, as promised—that you can implement today.
Clickbait. Rethink your titles and subject lines to get your audience’s attention. Remember: You want them to open an email or click on a link. The words you choose need to drive action. Which are you more likely to read: “ESPP enrollment window closes on Friday. Enroll today” or “Top benefits you’ll miss out on if you don’t enroll in ESPP by Friday”?
Listicles. No, this is not a made-up word to try to get another click. A “listicle” is an article in a list format. It is easy to organize thoughts into lists, and short lists are tempting to read. Which sounds more compelling, “Equity plan: frequently asked questions” or “5 critical things to know about your stock grant”? When you use listicles, keep them short. Trying to tempt employees to read “36 Tips for Tax Time” is a tough sell. Admit it—you’ve scrolled through an article to check the length before you committed to reading it, haven’t you? Bonus tip: Listicle titles make great clickbait.
Interactive quizzes. I’m sure many of us have been lured in by these social media gems: quizzes that rate us on whether we can identify more movie stars than the average person or spot grammar errors or identify exotic foods. Try this out on stock plan topics with a simple five-question quiz. Don’t make it too hard—people like to succeed—and be sure to connect your participants with more information. For example, reward those who score 4-5 with “Congrats! You are a Stock Plan Pro. You are ready for our advanced topics (with a link to deeper content)” or, for those who score less than 4, “Looks like you could benefit from our video on stock plan basics. (with link to video).”
When you are browsing through different forms of social media, take note of what attracts your attention and contemplate if those attention-grabbing tricks can be integrated into your stock plan communications. And, if you are in the Silicon Valley, please try to join us for the CEP Symposium on March 28. We have a session packed full of examples and activities designed to get all attendees to rethink their approach to communications. #ThisSessionRocks.
Emily Cervino is a Vice President at Fidelity Stock Plan Services. She has been an active participant in the equity compensation industry since 1998, and now focuses on strategic marketing initiatives, thought leadership, and building Fidelity’s strong industry presence.
Emily is a frequent speaker at equity compensation events, past president of the Silicon Valley Chapter of the NASPP, a member of NASPP, GEO, and NCEO, and a 2015 recipient of the NASPP’s Individual Achievement Award. Emily is a Certified Equity Professional (CEP) and she holds Series 7 and 63 securities registrations.
Views expressed are as of the date indicated and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the author, and not necessarily those of Fidelity Investments.
Links to third-party web sites may be shared on this page. Those sites are unaffiliated with Fidelity. Fidelity has not been involved in the preparation of the content supplied at the unaffiliated site and does not guarantee or assume any responsibility for its content.
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Today’s blog features guest author Thierry Vo of UBS Equity Plan Advisory Services, writing about the factors that correlate to participants placing greater value on their equity awards.
Three Steps That Can Increase the Value Employees Place on Equity Awards
By Thierry Vo, UBS Equity Plan Advisory Services
How do employees view their equity awards? Would employees value these awards more if they had advice that helped them integrate equity compensation with their broader financial plans? What tangible steps can employees take to recognize the value of equity awards?
These are just several of the questions UBS Participant Voice, an industry wide survey of equity plan participants, sought to answer using the UBS Equity Award Value Index, which measures the value employees place on their awards on a scale of 0-100. With companies granting more than $110 billion in equity to their employees each year*, understanding their participants’ attitudes toward these awards is critical.
The research found that while 32% of participants from a cross-section of industries and service providers see their awards as having high or considerable value (80-100 on the Index), 45% perceive little or no value in their equity (0-40 on the Index)—a concerning figure.
The UBS Participant Voice took the research one step further, conducting an industry-wide survey of more than 1,000 participants that sought to answer the question: What do employees who value their equity awards do differently?
Using the UBS Equity Award Value Index, UBS identified three key steps taken by employees who place high value on their equity awards:
Planning—Those who incorporate equity compensation into an overall financial plan have a more optimistic outlook toward the importance of equity awards than those who do not.
Advice—Those who discussed their equity with a financial advisor value their equity compensation holdings more than those who have not.
Diversification—Participants who diversify their company stock holdings value their awards more than those who do not.
The real impact for participants comes from combining all three: planning, advice and diversification. The survey found that participants who have taken all three steps place twice as much value on their equity awards and have greater confidence about reaching their goals.
This survey shows that advice can prove instrumental in helping participants appreciate their equity awards. It clearly highlights that participants who practice these three steps place higher value on their equity compensation awards.
To learn more about how equity plan participants perceive more value from their awards, visit the UBS website or contact UBS by e-mailing EPAScommunications@ubs.com or calling 866-706-2727.
* Equilar, Inc. Based on 2,885 companies in the Russell 3000 that have fiscal year-ends of July 31, 2012, or more recent, and valued the grant-date fair value of options, stock appreciation rights, restricted stock and stock unit awards granted by companies during the most recent fiscal year. All information was pulled from the 10-K and was calculated using company-disclosed figures for grant-date fair value.
Thierry is the Head of Product for UBS Equity Plan Advisory Services (“EPAS”), leading the creation and execution of the product vision for UBS’ stock plan business that supports both corporate clients and their participants.
With over 15 years of experience in financial services—12 of them directly in equity compensation—Thierry possesses a keen understanding of the complex issues facing the industry’s key constituencies. He has extensive experience designing flexible solutions to meet the industry’s evolving needs. Through his roles at several major service providers, he has had the opportunity to collaborate directly with many leaders in the field. These experiences have allowed him to develop a unique perspective on how to address the diverse challenges confronting issuers and recipients of equity compensation.
Thierry has spoken nationally and internationally on a variety of industry topics. As an active member of both the National Association of Stock Plan Professionals (NASPP) and the Global Equity Organization (GEO), where he has also served as a Board member, Thierry has consistently kept his finger on the pulse of the industry to prepare for what’s next.
Do your award agreements include the phrase “vesting commencement date” or a similar phrase? A recent lawsuit against Tesla hinges on what it means for vesting to “commence.”
The Lawsuit Against Tesla
A group of former Tesla employees have brought a lawsuit against Tesla, claiming that they should have been able to exercise their options at the time of their termination of employment, even though they had not yet fulfilled the one year of service required for the grants to begin vesting. At the heart of the lawsuit is the language in Tesla’s employment agreement, which states that vesting commences on the first day of employment. The employees have interpreted this to mean that the options were immediately vested at grant.
What Part of “One Year After” Don’t You Understand?
The whole claim seems rather disingenuous to me. As explained in The Recorder (“Trial Opens Over Tesla Options,” March 1, 2016):
The entire dispute turns on a single sentence in Tesla’s employment agreement letter, stating that employee stock options “will vest commencing upon your first day of employment.” But parenthetically added in the employment agreement is the following: “1/4th of the shares vest one year after the vesting commencement date, and 1/48th of the shares vest monthly thereafter over the next three years.”
Given the parenthetical, it seems hard to believe that anyone was really confused about when the options vested.
Key Takeaways
The problem with a lawsuit like this, however, is that no matter how disingenuous it might seem, it won’t go away by itself. Responding to a lawsuit often involves a lot of time, resources, and legal fees. It’s worthwhile to take some precautions to mitigate the company’s risk:
Make sure the language in your employment and grant agreements is clear. Avoid terms that are ambiguous, if possible. If you can’t avoid them, make sure they are clearly defined.
Take off your equity compensation hat once in a while. While a term like “vesting commencement date” might seem obvious to you, it might not be so clear to someone who doesn’t have a background in equity compensation. Plaintiffs’ attorneys are great at exploiting ambiguities.
Keep a record of all information communicated to employees about their awards. In a case like this, educational materials that further clarify how awards vest, possibly with examples, can help bolster the company’s defense.
If you’re a regular reader of The NASPP Blog, you’ve probably caught wind of my passion for employee engagement and communications. In today’s blog, I’ll explore some important and creative ideas for crafting your stock plan’s communication approach for 2016.
I’m always on the lookout for new ideas and trends in getting the message out to employees. If you’ve got a stock plan, you’ve probably figured out that the stock plan is only as good as your participants think it is, and communicating about the plan is an important factor in determining its success. With so many modern tools and choices at our fingertips, figuring out the best options for communication can feel overwhelming at times. To help with that, I’ve come up with 5 communication ideas for 2016.
Cultivate Plan Champions
Sometimes the task of engaging employees feels extra-large because of the quantity of people involved. If your stock plan participants number in the hundreds or thousands, then you know what I mean. While you definitely want your outreach and education to reach all participants, you may also want to consider investing time and resources into developing a handful (a few or dozens, depending on your stock plan size) of stock plan champions – employees who already ooze engagement and, armed with the right information, could spread the word among their peers in the workplace. Consider some smaller meetings or one-one-one sessions with these champions to educate them and encourage them to spread the word. Some ideal candidates for the role may be those who frequently show up at your door to ask questions, or are vocal about their appreciation for the plan. Studies have long shown that word of mouth in the workplace does have an effect – people trust their friends, including co-workers.
Publish Benchmark Information
A wealth of stock plan information is publicly available, which makes it fairly easy to compare the attributes of your stock plan to those of your industry peers and competitors. You’ll want to gain support and approval from management before taking this step, but evaluating your stock plan compared to other plans and highlighting some of your plan’s unique or attractive features can help employees understand how their stock compensation may compare to the rest of the industry.
Create Videos that Reflect Corporate Culture
Hands down, some of the best stock plan videos I’ve come across have a common thread: they all reflect some element of the company’s unique culture. I recall listening in on a session at our 23rd Annual Conference this past fall where a panelist who works for Facebook talked about a family of foxes that lives on site at their corporate headquarters (the foxes even have their own Facebook page). The company created stock plan videos featuring…you guessed it…a fox, which added a unique factor, oozed creativity, and tied into something special about the company’s culture. Instead of a boiler plate corporate video, think of what may plug in well to your company’s culture and let that inspire a theme for your stock plan videos and communications.
Diverse Populations Need Diverse Communications
There are so many forms of diversity in employee populations, and all of them need to be considered. I keep hearing buzz that addressing the needs of a very diverse group of participants continues to be a hot topic. There are generational issues to consider, including how values, work habits, and communication preferences vary among different generations. Baby boomers are working longer, and there are more and more millennials graduating college and entering the workforce. There are cultural considerations in communicating with participants from multiple geographic and cultural backgrounds. If you haven’t seriously contemplated all of these factors in the past, this is the year to evaluate your stock plan demographics and really dig into which modes, formats, and messaging are going to succeed in engaging employees across the board. Just as with marketing efforts, it may be necessary to “target” select participant groups for different communications in order to ensure the message resonates with the audience and achieves the intended goal of engagement.
“If you can’t measure it, you can’t improve it.” (Peter Drucker)
All of the above steps are virtually pointless if you don’t measure their impact on employee engagement. Communicating is not about throwing information out to the universe and hoping it sticks. If you haven’t been steadily measuring your communication strategies and efforts, make it a goal for 2016. There are many ways to measure – I’ll share a few here:
Conduct an employee engagement survey (keep the questions and survey on the shorter side – the longer it is, the less likely employees are to remain engaged long enough to complete it).
Track email click rates (How many people opened the email? Did people click on links in the emails?)
See if you can gather data from your IT department on employee technology behaviors (How many employees use email? Which social media sites are most popular?)
Consider allowing participants to rate content. This will give feedback on what is most useful and engaging from their perspective.
Bonus!
I said 5 tips, but I couldn’t resist a 6th: Be discerning with your content. Set a high standard for the content you put out to participants. Chances are, they are already inundated with messages from a variety of sources on many topics. Being consistent in putting out high quality content builds trust – participants begin to realize that any information coming from you is worth their attention.
Remember, whatever you do – be prepared to measure, measure, measure it!
You don’t need to do a complete overhaul all at once – focusing on one or two key areas can make a difference. Now’s the time to set your communication goals for 2016.
In just a couple of weeks, employees will begin receiving Forms 1099-B for sales they conducted in 2015. Here are five things they need to know about Form 1099-B:
What Is Form 1099-B? Anytime someone sells stock through a broker, the broker is required to issue a Form 1099-B reporting the sale. This form is provided to both the seller and the IRS. It reports the net proceeds on the sale, and in some cases, the cost basis of the shares sold. The seller uses this information to report the sale on his/her tax return. [Same-day sale exercises can be an exception. Rev. Proc. 2002-50 allows brokers to skip issuing a Form 1099-B for same-day sales if certain conditions are met. But your employees don’t need to know about this exception unless your broker isn’t issuing a Form 1099-B in reliance on the Rev. Proc.]
The Cost Basis Reported on Form 1099-B May Be Too Low. For shares that employees acquire through your ESPP or by exercising a stock option, the cost basis indicated on the Form 1099-B reporting the sale is likely to be too low.
Sometimes Form 1099-B Won’t Include a Cost Basis. If employees sold stock that was acquired under a restricted stock or unit award, or if they acquired it before January 1, 2011, the Form 1099-B usually won’t include the cost basis (although procedures may vary, so check with your brokers on this).
What To Do If the Cost Basis Is Incorrect (or Missing). If the cost basis is incorrect, employees will need to report an adjustment to their gain (or loss) on Form 8949 when they prepare their tax returns. If the basis is missing, they’ll use Form 8949 to report the correct basis.
An Incorrect Cost Basis Is Likely to Result in Employees Overpaying Their Taxes. It is very important that employees know the correct basis of any shares they sold. They will subtract the cost basis from their net sale proceeds to determine their taxable capital gain (or deductible capital loss) for the sale. Reporting a cost basis that is too low on their tax return could cause them to pay more tax than necessary. In some cases, this doubles their tax liability. The only person who wins in this scenario is Uncle Sam; your employees lose and you lose, because no one appreciates the portion of their compensation that they have to pay over to the IRS. Your stock compensation program is a significant investment for your company; don’t devalue the program by letting employees overpay their taxes.
Employees should review any Forms 1099-B they receive carefully to verify that the cost basis indicated is the correct basis. If it is missing or incorrect, they should use Form 8949 to report the correct basis.
The Portal also has examples and flow charts, all of which have been updated for the 2015 tax forms. [In case you are wondering, there were no significant changes to Form 1099-B, Form 8949, or Schedule D in 2015.]
Quick Survey on Stock Plan Education
The NASPP and Fidelity Stock Plan Services are pleased to announce a joint survey on stock plan education programs. Take this quick survey today to find out how your education program compares to your peers’. The survey includes fewer than 25 questions; you can complete it in less than ten minutes—do it today, before you forget. The deadline to complete the survey is Friday, December 11.
New Studies
We’ve posted the following new studies to the NASPP website:
Towers Watson recently highlighted an observed correlation between communication efforts and both employee engagement and financial performance that outperforms peers in their Executive Pay newsletter (“Communicating Incentive Plans Better” – August 14, 2015). That motivated me to jump on my once-in-a-while bandwagon about effective employee communications. In today’s blog, I’ll explore some tips to think about, as well as highlight more opportunities for you to advance your education in this area.
5 Ways to Communicate Better
Towers Watson shared 5 tips to better communications. I am going to borrow those “tips” and expand on them with my own thoughts. Before I do, I want to throw out a couple of things. First, I think stock plan administrators are not often marketing people by training or trade. Some of us become effective communicators, but it’s important to remember that communicating about stock plans to employees is very much about marketing. Yes, we need to communicate the specifics, but we also need to deliver the intended incentive or value proposition to the participant, and that’s the marketing piece. Second, stock plan administrators should not necessarily need to wear the communication hat alone. I often hear administrators say that they feel responsible for driving plan communications. That may be true, but there can be tremendous value in engaging marketing expertise – not only as a fresh set of eyes on the communication strategy, but also because that marketing resource could bring a whole new set of tools to your employee education.
1. Treat employees like consumers. Companies spend thousands, even millions of dollars trying to figure out how to resonate with their consumers in the shortest amount of time. Capturing attention is valuable, and attracting the attention of your employee is not different than what is wanted from the consumer. Messages should be quick and designed to draw in their attention.
2. Ensure communications highlight the key messages and behaviours the plan is trying to drive. In summarizing this point, Towers raises a critical piece – it’s not enough to just communicate about things like performance metrics. Yes, employees need to know what the measurements will be, but just as importantly, they have to know what it takes to achieve them. In crafting communications about performance metrics (or even simple time based vesting), make sure the content includes not just the end goal, but identifies the path necessary to get there!
3. Show “what’s in it for me?” I’ve been guilty myself of not doing this part. Sometimes we focus on getting factual information out, and overlook or omit the value proposition to the participant. The ESPP has a 15% discount – so what? A great communication takes the “fact” that there is a 15% discount in the ESPP and expands the communication to explain why the participant should care about that (without crossing some of the fine lines I identify in the last paragraph of this section). Remember, your stock plan is only as valuable as your participant thinks it is.
4. Keep it simple. It’s easy to mistake a more advanced audience (like executives) as good targets for an overload of information. Towers Watson shared that discussions with top executives revealed, in some cases, little understanding about how the plans actually work. The reality is that matter who the audience is, keep the communications simple. The communications should not get more complex just because the audience is deemed to be more intellectual or higher ranking in an organization. Be sure to add in graphics, charts, or other visual information that reduces texts and illustrates a concept.
5. Segment. Not everyone learns the same way – some people need to see an example on paper, others can just read about it and understand. It’s imperative that any communication takes into account the recipient demographics. Once you know who is going to be on the receiving end, you can use different modes of communications – and even wording within a communication – to best connect with your audience. With so many tools available (videos, in person meetings, email, text, and more), you should have several choices in delivering your message.
Although I have introduced the word “marketing” to the communication mix, I also want to reiterate that there are some fine lines that need to be considered. It’s important that any marketing (or communication) message be reviewed by counsel to ensure there are no financial or luring promises, over education, or tricky guidance (for example, a marketing message of “The ESPP Can Save You Money on Taxes” is likely not going to fly. Although there could be tax advantages to participating in a qualified ESPP, the company cannot guarantee or represent specific tax savings and it could be risky to suggest such.) It’s time to take communications beyond simple facts and create an overall “marketing” campaign that captures participant attention and delivers on highlighting the value or incentive the stock plan was designed to achieve.
Exciting Education Opportunities
The NASPP’s 23rd Annual NASPP Conference kicks off in less than 3 weeks! We have an entire track at the Conference dedicated to “Administration and Communication,” so check out the list of those sessions to identify your must-attend panels.
We recently posted the executive summary to the NASPP and PwC 2015 Global Equity Incentives Survey and, later today, we will be presenting highlights of the results in our webcast, “Top Trends in Equity Plans for International Employees.” For today’s blog entry, I highlight five findings that I think are significant:
Globalization Continues: Back when we did the 2012 survey, 20% of respondents said they expected to increase global participation in their stock plan and this trend held steady in 2015, with 19% again expecting to increase participation. In addition 77% of respondents said they expect global participation to remain the same. That leaves only a very small percentage of companies that expect to pull back their global stock plans.
Compliance Reviews Are More Routine: The percentage of respondents who said they conduct annual compliance reviews of their global stock plans increased to 43%, up from 34% in 2012. At the same time, respondents conducting only sporadic reviews dropped to 40%, down from 45%. It can be risky to wait until you hear about a regulatory change to conduct a compliance review; annual reviews help ensure that you know when the laws impacting your global stock plan have changed.
UK Takes the Lead in Challenging Tax Compliance: We asked respondents to indicate which countries they found to be challenging in terms of tax compliance. The UK was first, with 46% of the votes, up from 36% (third place) in 2012. China, however, is hanging in there at second place with 42% of the votes (China was in first place in 2012). France dropped to third place, with 26% of the votes (down from second place and 38% of the votes in 2012).
Mobility Compliance Up: The percentage of respondents tracking mobile employees continues to increase: 87% of respondents track formal assignees (up from 80% in 2012), 62% of respondents track mobile employees who aren’t part of an assignee program (up from 60% in 2012), and a surprising 27% track business travelers (up from 18% in 2012). But the tools for tracking mobile employees still leave something to be desired: 36% of respondents track this in an Excel spreadsheet, up from 29% in 2012. About another third (32%) outsource tracking to a consultant or TPA. The final third use a hodge podge of methods.
Participant Understanding Looks Like a Mountain Rather Than a Bell Curve: Only 34% of respondents felt that their global participants understand a good deal or completely understand their stock plan benefits. That leaves a two-thirds majority for whom participant understanding is at best, somewhat or partial. Global stock plans are a very expensive employee benefit, both in terms of the P&L and administrative cost. It seems a little crazy to invest resources like this in a plan and not also invest in the education to make sure participants understand it.
Be sure to tune in to the webcast later today to learn more highlights from the survey.
And now for something a little lighter: a video by the blog Cady Bar the Door on the whistleblower provisions of the Dodd-Frank Act. I know you don’t care about the whistleblower provisions, but you should watch the video anyway. It might make you feel better about your own company’s general counsel.
BTW–if you think this would be a cool format to use for educating employees, you can make your own Xtranormal video. Just pick your characters, type in your dialogue, and Xtranormal does the rest. You can make at least one movie, probably more, for free.
Here’s your NASPP To Do List for the week:
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 we keep an ongoing “to do” list for you here in our blog.
Submit a question for the Question of the Week Challenge to be entered in a raffle for a free registration to the CEP Symposium (see last week’s NASPP To Do List for more information).
Register for our spring 2013 online Stock Plan Fundamentals program. Don’t wait–the early-bird rate is only available until February 15.
Order the audio from the 20th Annual NASPP Conference! Just $65 per session for NASPP members–less per session if you purchase a multi-session package.
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.
Emily Cervino is a Vice President at Fidelity Stock Plan Services. She has been an active participant in the equity compensation industry since 1998, and now focuses on strategic marketing initiatives, thought leadership, and building Fidelity’s strong industry presence.