Reminder: Final IRS Reporting Rules on Incentive Stock Options and Employee Stock Purchase Plan Transactions in Effect for 2010; Information Statements Due January 31, 2011


This is a reminder to companies that grant incentive stock options (“ISOs”), or that maintain a tax advantaged employee stock purchase plan (“ESPP”). No later than January 31, 2011, companies must furnish information statements to employees (and former employees) who exercised an ISO during 2010 or transferred stock during 2010 that was previously acquired pursuant to an ESPP. This is also the first year for which reports to the IRS are required. No later than March 31, 2011, for electronic filers and no later than February 28, 2011, for paper filers, companies must also provide such information to the IRS.

Failure to provide such statements to employees on a timely basis may cause the company to incur a penalty of $50 per statement, up to a maximum of $100,000 per year. Late filings to the IRS will incur additional penalties of $50 per statement, up to a maximum of $250,000 per year.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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