On December 19, 2007, the Internal Revenue Service (IRS) issued Notice 2008-8, providing interim guidance applicable to Section 6039 of the Internal Revenue Code (Section 6039) and waiving employers’ 2007 obligation to file certain information returns with the IRS.
Previously, Section 6039 required employers to provide a written statement by January 31 of the following year to each employee who received employer stock upon the exercise of an incentive stock option (ISO), or who transferred stock that was acquired by the employee pursuant to an employee stock purchase plan (ESPP) during the prior calendar year. The information to be included in the statement is set forth in existing IRS regulations.
The Tax Relief and Health Care Act of 2006 amended the information reporting requirements of Section 6039 to require employers to file an information return with the IRS, in addition to providing employees with the information statement. The amendment applies to stock transfers occurring on or after January 1, 2007.
Section 6039, as amended, provides that the time and manner in which to file the information return, as well as the information that must be provided to the affected employees, will be set forth in regulations. The IRS, however, has yet to issue new regulations. As a result, the IRS in Notice 2008-8 has waived the employer obligation to file information returns in January 2008 for 2007. Employers are still, however, required to provide the information statement, which should include the information required under the existing regulations, to affected employees by January 31, 2008.
- By January 31, 2008, employers must furnish information statements to employees who received stock upon the exercise of an ISO or who transferred stock that was acquired pursuant to an ESPP in 2007.
- Because the new regulations relating to the information returns are expected to be issued this year, employers should be prepared to file with the IRS 2008 information returns under Section 6039 by January 31, 2009, when the 2008 statement to employees will also be due.