Annual Notices for ISOs and ESPPs due February 2, 2015
Companies that grant incentive stock options (ISOs) are required to provide notices to current and former employees who exercised ISOs during the preceding calendar year. Similar notices must be given to current and former employees to report the initial transfer of legal title to stock acquired at a discount pursuant to the exercise of an option under an employee stock purchase plan (ESPP) (e.g., transfer of such stock to a brokerage account). The notice deadline for these 2014 reportable events is February 2, 2015.
The same information must be reported to the IRS on Form 3921 (for ISOs) or Form 3922 (for ESPPs) or acceptable substitute forms. The IRS filing deadline is March 2, 2015 for paper filers and March 31, 2015 for electronic filers. Electronic filing is done through Filing Information Returns Electronically (FIRE), the same system used to file Forms 1099 electronically. The IRS forms or acceptable substitutes may also be used to provide the required notices to employees.
Notices are required to provide the items of information listed below.
For ISO exercises:
A company that is unable to comply with the notice deadline may apply for an extension of up to 30 days by submitting to the IRS by February 2, 2015 a written request providing, among other information, the reason for the delay. An extension of the deadline for the related filings may be obtained by submitting a request on IRS Form 8809. Additional information about the notice and filing requirements as well as procedures for requesting extensions is available on the IRS website in both the General Instructions for Certain Information Returns and the specific Instructions for Forms 3921 and 3922.
For more information about these notice and filing requirements, please contact any member of Ropes & Gray’s tax or executive compensation and employee benefits practice groups.