Here we are again at the start of another season of Section 6039 filings. Nothing much has changed with respect to Section 6039 filings in recent years, so imagine my surprise when I learned that the IRS had updated Form 3922.
Form 3922 Grows Up
As it turns out, the only update to the form is that it has been turned into a fill-in form. If you are planning on submitting paper filings, this allows the form to be filled in using Adobe Acrobat, so you don’t have to scare up a typewriter or practice your handwriting. I haven’t owned a typewriter since college and even I can’t read my handwriting, so I am a big fan of fill-in forms.
Unfortunately, this is just about the least helpful improvement to the forms that the IRS could make. Form 3922 is for ESPP transactions. ESPPs tend to be offered by publicly held companies with well over 250 employees. Chance are, if a company has to file Form 3922, the company has more than 250 returns to file (less than 250 ESPP participants is probably a pretty dismal participation rate for most ESPP sponsors) and the returns have to be filed electronically. The fill-in feature doesn’t impact the electronic filing procedures; it is only helpful for paper filings.
It would have been more helpful if the IRS had made Form 3921 a fill-in form. Given the declining interest in ISOs (only around 10% of respondents to the NASPP/Deloitte Consulting 2016 Domestic Stock Plan Design Survey grant ISOs), companies are more likely to be filing this form on paper. The IRS notes, however, that it selected Form 3922 to be made into a fill-in form because they receive so few filings of it on paper. I guess the IRS’s goal was to appear helpful but not actually be helpful. Your tax dollars at work.
A Fill-In Form Isn’t As Helpful As You Think, Anyway
As it turns out, having a fill-in form may not be that helpful, anyway. I was thinking you could fill in the form, save it, and then email it to the IRS but it doesn’t seem like this is the case. No, even if you fill it in using Adobe Acrobat, you still have to print it out and mail it to the IRS. And the requirements for printing the form out still include phrases like “optical character recognition A font,” “non-reflective carbon-based ink,” and “principally bleached chemical wood pulp.” I think this means that you have to print the form on white paper, using black ink that isn’t too shiny, and using the standard fonts in the fill-in form. But I’m not entirely sure.
What About Form 3921?
When I first saw that Form 3922 is now fill-in-able, I assumed, perhaps naively, that a fill-in Form 3921, which would truly be useful, would be available any day. But that was back in September and still no update to Form 3921. Upon reflection, especially given the IRS’s statement about why this honor was bestowed upon Form 3922, I think I may have been overly optimistic.
A riddle: what do the Trade Adjustment Assistance Program, the African Growth and Opportunity Act, and HOPE for Haiti have to do with Forms 3921 and 3922? You might think “not much” but then you aren’t a member of Congress. The Trade Preferences Extension Act, which includes provisions relating to those three things and a couple of other global trade-related items, also increases the penalties for failure to file Forms W-2 and forms in the 1099 series, which includes Forms 3921 and 3922 (why forms 3921 and 3922 are considered part of the “1099” series is another riddle for another day).
The New Penalties
Timing of Correct Filing
New Penalty (Per Failure)
New Annual Cap
Old Penalty (Per Failure)
Old Annual Cap
Within 30 days
$50
$500,000
$30
$250,000
By Aug 1
$100
$1,500,000
$60
$500,000
After Aug 1 or never
$250
$3,000,000
$100
$1,500,000
With intentional disregard,
regardless of timing
Min. of $500
uncapped
Min. of $250
uncapped
Make That a Double
The penalties apply separately for returns filed with the IRS and the statements furnished to employees. If a company fails to do both, both the per-failure penalty and the cap is doubled. Thus, if both the return and the employee statement are corrected/filed/furnished after Aug 1, that’s a total penalty of $500, up to a maximum of $6,000,000. If intentional disregard is involved, that’s a minimum total penalty of $1,000 (and this amount could be higher) with no annual maximum.
Effective Date
The new penalties will be effective for returns and statements required after December 31, 2015, so these penalties will be in effect for 2015 forms that are filed/furnished early next year.
Penalties At Least As Interesting As the Trade Provisions?
Interestingly, when I Googled “Trade Preferences Extension Act,” so I could figure out what the rest of the act was about, the first page of search results included as many articles about the new penalties as about the trade-related provisions of the act.
If you want to know what the rest of the act is about, here is a summary from the White House Blog. There’s not a lot more to say about the penalties but if you want to spend some time reading about them anyway, here are summaries from Groom Law Group and PwC.
To start off the new year, I have a few reminders for Section 6039 filings for ISO and ESPP transactions.
Deadlines
Participant statements need to be furnished by February 2, 2015 (normally the deadline is January 31, but that’s a Saturday). Paper returns need to be filed with the IRS by March 2 (February 28, the normal deadline, is a Saturday) and electronic returns need to be filed by March 31 (this deadline applies regardless of whether electronic filing is on a mandatory or voluntary basis).
Extensions
It’s easy to get an extension for filing the returns with the IRS; log into the IRS Fire system and complete Form 8809. So long as you do this by the deadline, you get an automatic 30-day extension—no questions asked. It is harder to get an extension for the participant statements. You can’t use Form 8809 for this; you have to write a polite letter to the IRS explaining why you need the extension and hope that they grant it to you. See pg 13 of the “General Instructions for Certain Information Returns” for details of what you need to say in the letter and where to send it. The extension is not automatic, so you’d best get on this right away if you think you’ll need one.
Substitute Participant Statements
You can create a substitute statement for participants that lists all their transactions on one page, rather than a separate form for each transaction. You still have to use the IRS terminology, but you can include your own statement that explains what all the words mean (or even annotate the statement itself). But you can’t include any slogans or taglines on the form and if you are going to include your company logo, you have to comply with specific guidelines explained in IRS Publication 1179 (see pg 6). The IRS is serious about this—they are worried your logo might make the form look like junk mail—so it might be best to skip the logo.
Rounding
Shares and dollar amounts have to be rounded in electronic filings (to the nearest whole share or penny, respectively). The IRS says to use a true round for share amounts (that’s rounding down for .4 and under, up for .5 and above). They don’t specify how dollar values should be rounded but since they recommend a true round for share amounts, it’s probably reasonable to use the same approach for dollar values (that’s also how dollar values are rounded on other tax forms (e.g., tax returns). But other approaches might be reasonable as well; I’m fairly certain the IRS isn’t that concerned about how you round. Just be consistent.
Employee ID Number
This needs to be the employee’s tax ID number. Also, you can’t truncate it or mask it on the participant statements. The IRS eventually checks to make sure the number is correct and you’ll have to pay a fine if it is wrong. But they won’t get around to checking until you are in the maximum penalty period. So be smart and run a TIN matching program on your returns before you file them with the IRS.
Account Number
For our purposes, think of this as a transaction number. You can use any system you want to come up with the number (and it can include letters as well as numbers), but you need to assign a unique number to every transaction reported. If you later have to file a correction, this number is how you will identify the transaction being corrected.
Names
Don’t include any special characters in employee names other than hyphens and ampersands.
Just a Few Filings?
Even though you only have a handful of filings, you cannot download the form from the IRS website and fill it out or gin up a form that looks similar in Word and use that to file your returns. The IRS has all sorts of fussy requirements for returns filed on paper, including that they be printed on special paper with special ink. If you don’t want to pay a third party to help with this, you have to order the paper forms from the IRS and wait for them to send them to you. Then you need to scare up a typewriter or print very very neatly. There are tools that are quite affordable that can be used to file even just a handful of forms—personally, I think this approach would be easier than finding a typewriter. Email me and I can send you a list.
Many companies have settled into a routine when it comes to furnishing information statements and filing the IRS returns required under Section 6039 of the Internal Revenue Code. Whether you have a solid routine, or this is the first time you’re facing Section 6039 compliance, there are a few areas where companies should verify that they are fully satisfying 6039 requirements as they near the deadlines for 2013 tax year reporting.
Review Non-U.S. Employees
Non-resident aliens who do not receive a W-2 are not subject to Section 6039 reporting. If a non-resident alien does receive a W-2, then 6039 statements would also need to be furnished.
U.S. citizens who are working abroad are subject to Section 6039 reporting, so companies should not rely on address filters alone to determine whether or not an employee should receive an information statement.
Implement a New ESPP?
Did your company implement a new ESPP recently? It’s important to note that the trigger for filing Form 3922 (for ESPP shares) is the first transfer of legal title for the shares, not the purchase or exercise of the shares. The moment of first legal transfer includes the deposit of shares to a brokerage account in the employee’s name upon purchase, like many companies do via a captive broker. If you had ESPP purchases in 2013 and deposited purchased shares immediately into a brokerage account for the employee, then you’ll need to report the transaction(s) this season. Note that issuances into book entry at a transfer agent or in certificate form do not constitute a legal transfer of title. Those shares would be reported once deposited to a brokerage account, gifted, or sold. Of course, this doesn’t only apply to new ESPPs, but most companies with existing ESPPs are already aware of this requirement. It’s possible that those implementing a new ESPP may overlook this “first legal transfer of title” requirement if not looking at the nuances carefully.
More Transactions this Year?
The IRS doesn’t require companies to file 6039 returns electronically unless there are 250 or more of them. The 250 number is per form type, so if you have 251 Form 3921 returns and 249 Form 3922 returns, only the Form 3921 returns need to be filed electronically. For quantities less than 250 per form type, companies may elect to file electronically or via paper. Even if you didn’t have to file electronically in the past, you’ll want to look at each year’s quantities anew to make sure you’ve assessed the threshold correctly. The deadline for paper filings is February 28, 2014. The deadline for electronic filings is March 31, 2014.
No Chump Change for Failures and Mistakes
Failing to furnish information information statements is no laughing matter. The IRS penalty for not furnishing an information statement, or, for providing an incomplete or incorrect statement to a participant is up to $100 per statement. In addition, a separate penalty is assessed for issues with 6039 returns that should be filed with the IRS – up to $100 per return for those not filed or incomplete/incorrect returns. As a result, you’ll want to make sure you are really auditing the entire process – even if it’s outsourced, to ensure there are no failures. There is a cap of $1.5 million on each penalty type, but that’s high enough to want make doubly sure that the proper reporting is done accurately and timely.
For more information, the NASPP has an excellent Section 6039 portal, available on our web site.
In today’s entry I highlight a few articles that are available on the NASPP website that I think are particularly valuable. Many of these articles are updated on an annual basis; together they comprise the core foundational knowledge necessary to be proficient in stock compensation.
Restricted Stock and Units: The article “Restricted Stock Plans” covers just about anything you could want to know about restricted stock and unit awards and is updated annually.
ESPPs: “Designing and Implementing an Employee Stock Purchase Plan” takes an in-depth look at the regulatory and design considerations that apply to ESPPs, particularly Section 423 plans. This is a reprint of my chapter in the NCEO’s book “Selected Issues in Equity Compensation” so it is updated annually.
Securities Law: Alan Dye and Peter Romeo’s outlines of Rule 144 and Section 16 provide great overviews of these areas of law and are also updated annually.
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.
I’m sure that all of you are completely on top of this, but just in case you’ve gotten a little distracted by all the excitement over the new tax withholding rates and the American Taxpayer Relief Act, don’t forget that it’s time to file the returns and distribute the information statements required under Section 6039 for ISOs and ESPPs.
Section 6039 Deadlines Coming Up
The information statements need to be distributed to employees by January 31 and the returns need to be filed with the IRS by February 28 (if filing on paper) or April 1 (if filing electronically).
The returns are filed on Form 3921 for ISOs and Form 3922 for ESPPs. You can simply provide employees with a copy of the returns that will be filed with the IRS or you can provide them with a substitute statement, provided the statement complies with the IRS’s requirements (which aren’t terribly onerous despite what one law firm memo I’ve seen suggests).
What If You Did Forget?
Well, you’ve still got plenty of time on the returns that are filed with the IRS, especially if you file electronically, which is actually probably easier than trying to file on paper anyway. There are several providers than can take your data, whip it into shape, and file it electronically for you–see the NASPP’s webcast “Comparing Solutions for Section 6039 Compliance. Not only is the deadline (April 1–we get an extra day this year because March 31 is a Sunday) still several months off, but you can file for an automatic, no-questions-asked 30-day extension using Form 8809.
But you’d better get cracking on the employee statements. There’s no automatic extension available here–if you need an extension you need to write a letter to the Extension of Time Coordinator in the Information Returns Branch at the IRS, include a good excuse (the dog ate my information statements?), and hope the IRS is feeling generous. [A couple of thoughts come to mind: 1) How cool is that job title? I think it would be awesome to tell people that you are the “Extension of Time Coordinator.” I bet a lot of people want to be your friend. I wonder if this person also has the authority to suspend birthdays? And, 2) if you are in need of an extension, it’s nice to know that there are so many other people in the same boat that the IRS has actually created a position to handle all the requests.]
If any of my readers have requested (or have clients that requested) an extension on the employee statements I’d love to hear from you–how quickly did the IRS respond, was the extension granted, did they give you are hard time about it, etc.?
More Information
The NASPP has loads of resources on Section 6039–Section 6039 is practically our middle name! Our Section 6039 Portal brings together all of our great resources on this topic, including numerous blog entries we’ve written on the topic as well as many other articles we’ve collected and various IRS publications that relate to this reporting obligation.
New this year, we’ve posted the article “6039 Gotchas!” by My Equity Comp to the portal. And the article “Figuring Out Section 6039 Filings” answers every question you could possibly have on either the returns or the statements. If it doesn’t, let me know so I can update it.
In addition to the webcast on providers that I mentioned above, we have a “lessons learned” webcast on 6039 filings.
As the deadline for filing Forms 3921 and 3922 draws near, I have finally heard from the IRS on a nagging question (see Topic #6810 in the NASPP Discussion Forum): if a company offers an ESPP in which employees purchase another corporation’s stock–for example, a subsidiary that sponsors an ESPP in which employees purchase the parent company’s stock–which company should be listed on Form 3922?
Which Corporation Should Be Listed on Form 3922? For ISO exercises (reported on Form 3921), this matter is easily resolved because the form includes space to list both corporate entities. The corporation that transferred the stock to the employee (presumably the plan sponsor–in my example, the subsidiary) is indicated in the “Transferor” box and the corporation whose stock was transferred (in my example, the parent company) is indicated in box 6.
Form 3922, however, only has space for one corporation. §1.6039-1(b)(1)(ii) of the final regulations states that the return for the transfer of ESPP shares is required to include “The name, address and employer identification number of the corporation whose stock is being transferred.” Based on that, the company whose stock is purchased (in my example, the parent company) should be the corporation indicated on Form 3922.
Why the Confusion?
Some companies would prefer to include the plan sponsor on Form 3922, rather than the company whose stock was purchased under the plan. For example, in the case of subsidiary sponsoring an ESPP in which employees purchase stock of a foreign parent company, there is concern that including the foreign parent as the corporation on Form 3922 could cause the IRS to think that the foreign parent has employees or a permanent establishment in the United States, which could trigger other tax-related issues.
Even where the company whose stock is purchased is not a foreign company, there is concern that listing this company, instead of the actual plan sponsor, on Form 3922 could cause the IRS to think that the individuals for which Form 3922 is filed are employees of the company indicated, causing confusion with regards to other tax matters (e.g., would the IRS then be looking for a Form W-2 from this company for the individuals).
What Do the Form Instructions Say?
The instructions to Form 3922 are not as specific as the final regulations with regard to what corporation must be listed. Per the instructions, the term “corporation” could include (but is not even limited to) the corporation issuing the stock, a related corporation of the corporation, and any party in control of the payment of remuneration for employment to the employee. The box itself on the form is labeled “Corporation,” not “Transferor,” as on Form 3921. These instructions seem to allow some leeway for companies to make their own determination as to which corporate entity should be indicated on the form.
What Does the IRS Say?
Given the confusion on this matter, I contacted the IRS for guidance. Just yesterday, I received an informal response from the IRS Chief Counsel’s office that the corporation listed on Form 3922 must be the corporation whose stock was purchased/transferred. The Chief Counsel recognizes that this could cause some problems with foreign corporations, but is nevertheless sticking to what the final regs say.
What Do You Say?
I’m curious to know what our members think about this and how much of a concern it is for you. It has been suggested to me that if we approached the IRS reasonably about this, we might get some additional relief. If you send me your carefully considered and professionally presented concerns, including the reasons why you would like to have the employer corporation listed on Form 3922 instead of the corporation whose stock was purchased/transferred, I will present those comments to the IRS. You can send your comments to me at bbaksa@naspp.com.
I wouldn’t count on getting any relief by the end of March, however. So, for this year filings, I would include the corporation whose stock was transferred on Form 3922.
Register Now for Early-Bird Savings on the NASPP Conference I’m excited to announce that the 19th Annual NASPP Conference will be held in San Francisco from November 1-4, 2011. Register by May 13 to receive the special early-bird rate!
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.
Register for 19th Annual NASPP Conference (November 1-4 in San Francisco). Don’t wait; the early-bird rate is only available until May 13.
I understand that Forms 3921 and 3922 still are not available from the IRS, so, in today’s blog, I provide instructions for requesting an extension of the filing deadline.
Note: I was not able to personally verify the availability (or lack thereof) of the forms prior to posting this blog entry because, of course, the IRS was closed yesterday for Presidents’ Day. Here at the NASPP, we were working–just one more way in which the NASPP is better than the IRS (see NASPP Discussion Forum Topic #6788 for more proof that the NASPP provides better service than the IRS).
Time is Running Out A week or so ago, when I placed my order for one copy each of Forms 3921 and 3922, I was told that it takes five to seven days to receive the forms. Thus, at this point, it seems unlikely that the paper forms will arrive in time for the filing deadline on February 28. Any company that is planning on filing on paper should probably go ahead and file for a 30-day extension.
How to Request an Extension
You can file Form 8809 to request a 30-day extension of the filing deadline. If you file Form 8809 electronically–which is easy peasy; the IRS provides an online fill-in form for this purpose–the extension is granted automatically, no questions asked. You don’t even have to state a reason for needing the extension (I know, I know, you really want to explain that the reason you need the extension is that the IRS HASN’T MADE THE FORMS AVAILABLE). You can file for the extension online, even though you will be filing the returns on paper. So long as you submit your extension request by February 28, there are no penalties for filing for the extension.
Log in. If you don’t have a login, you can easily create one for yourself. Follow the instructions provided.
Click “Main Menu” (in the left column). This will take you to the FIRE system main menu.
Click “Extension of Time Request” (in the left column). This will take you to the Extension of Time Request page.
Select “Fill-In Extension Form.” This takes you to a short explanation of the request form.
Read the explanation. Wonder to yourself why the IRS has to be so wordy all the time. Click the Continue button. This will take you to the online extension request form.
Complete the form and click the Submit button. You should get an online confirmation that your extension has been approved. (I say “should” because I didn’t actually click the Submit button myself when I tested this. The NASPP doesn’t have any Forms 3921 and 3922 to file so it didn’t seem very smart to confuse the IRS by filing for an extension on forms we aren’t filing. I can’t imagine trying to explain that to an IRS auditor.)
Print the confirmation for your records.
Once your extension request is approved, you’ll have until March 30 to file the returns. Hopefully the forms will be available long before then. If they are not, however, you can file for another extension. That extension isn’t granted automatically and you have to give a reason for the request, but I can’t really imagine a better reason than that the IRS hasn’t yet made the forms available.
Electronic Filers Don’t Need an Extension
If you are filing Forms 3921 or 3922 electronically, you don’t need an extension because: 1) you already have until March 31 to submit the filing and 2) you don’t need the actual forms from the IRS. You are submitting an ASCII text file via the FIRE system. If you have your file ready to go, you could submit it today, even though the official forms aren’t available yet.
More Information???
We are trying to get more information from the IRS about when the forms will be available. If we find out anything, you can be sure we’ll let our members know. Follow the NASPP on Twitter or Facebook to make sure you don’t miss any announcements we make about the forms.
Update: I spoke to two IRS representatives this morning, February 22. Forms 3921 and 3922 are still not available and they did not know when they will be available. They encouraged companies to request a filing date extension (as I’ve described in this blog) or to file electronically.
Last Chance to Submit Speaking Proposals for the NASPP Conference The IRS isn’t the only one with a February 28 deadline. All speaking proposals for the 19th Annual NASPP Conference must be submitted by February 28. (And unlike the IRS, the NASPP won’t grant an automatic 30-day extension, no matter how nicely you ask–you can chalk one up for the IRS, but I still think the NASPP is better.)
If you missed the big announcement last week, the NASPP Conference will be held from November 1-4 in San Francisco. Look for information on registering for the Conference soon.
Last Chance for the Early-Bird Rate for the Online Fundamentals This is also the last week to qualify for the early-bird rate on the NASPP’s acclaimed online program, “Stock Plan Fundamentals.” This multi-webcast course covers the regulatory framework and administrative best practices that apply to stock compensation. It’s a great program for anyone new to the industry or anyone preparing for the CEP exam. Register by February 25 for early-bird savings.
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.
When the NASPP conducted our quick survey on Section 6039 back in October, there were a lot of “undecided” responses. So we conducted another survey last month. The results are in and decisions have been made.
Filing Section 6039 Returns with the IRS
Electronic filing is the clear winner here, with 78% of respondents filing the returns for ISOs electronically and a landslide 90% filing electronically for their ESPP transactions. Surprisingly, 5% of respondents are planning to file ESPP returns on paper; they must be from very small companies or have very low participation rates in their ESPP to manage this. I can’t imagine trying to file the returns on paper–my handwriting would never pass muster with the IRS and I have no idea where to scare up a typewriter these days.
In terms of getting the job done, the trend is towards outsourcing. Only 23% of respondents are preparing and filing in-house for ESPP returns; more–41%–are handling the job in-house for ISOs. When we asked this question back in October, 29% were undecided, but now that the deadline looms near, almost everyone has made a decision: only 2% remain undecided about outsourcing for ISO returns and only 5% are undecided for ESPP returns.
Participant Statements
More companies than I expected were planning on distributing copies of the actual Forms 3921 and 3922 to their employees: 32% of respondents for ISOs and 26% of respondents for ESPPs. Of course, as I’m sure all of these folks know, the IRS did not make the forms available in time for this, so these folks most likely ended up distributing substitute statements (unless they requested an extension from the IRS).
Most of the rest of the respondents distributed substitute statements that aggregated multiple transactions on one page: 58% of respondents for ISOs and 64% of respondents for ESPPs.
Back in October, 50% of respondents were on the fence about including an explanatory letter with the statements. I’m pleased to see that the majority decided to go with the more-information-rather-than-less approach: 86% of respondents ended up including an explanatory letter with ISO statements and 88% did so for ESPP statements.
Decisions went the opposite way on distributing the statements electronically. 24% of respondents were considering this back in October, but the majority (90% for ISO statements, and 87% for ESPPs) ended up distributing the statements on paper. Not surprising, given the onerous requirements for electronic distribution. It will be interesting to see how many companies move towards electronic distribution in the next few years.
More Information
For everything you need to know about Section 6039, check out the NASPP’s Section 6039 Portal.
A More Social NASPP The NASPP is networking socially: you can now follow us on Twitter or like us on Facebook. We’ll be posting announcements whenever we post new content on Naspp.com–it’s a great way to keep up with all the content we have on the website.
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.