Have Your Employees Exercised Stock Options in 2011?

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IRS deadlines are quickly approaching for 2011 Incentive Stock Option Annual Reporting.  The following information outlines information for nonpublic companies where employees exercised ISO options during 2011. Since an “in-the-money” ISO exercise creates Alternative Minimum Tax income preference, employees need to know if the stock value was higher than their exercise price at the time they exercised.

What do you need to do?

  • Employers are obligated to inform employees by January 31st of the market value at the time of exercise so they can prepare their personal returns correctly. The easiest way to do this is by sending employees a letter.
  • In addition, the company must file Form 3921 with the IRS to notify them about the exercise by February 28th. Click here for IRS link instructions for Form 3921 and a link to the form itself.