IRS Wants to Collect Payroll Tax on Stock Options

The IRS is about to make history if it is successful with its plan to make incentive stock options (ISOs) and employee stock purchase plans (ESPPs) vulnerable to Social Security, Medicare, and other payroll taxes. Normally it's Congress that makes the rules about what does and doesn't get taxed, but this time the IRS is stepping into the circle and trying to assess a new tax that will add an estimated $23 billion to the federal coffers over the next 10 years.

Last fall, the IRS issued proposed regulations that clarify the law on withholding payroll taxes on ISOs and ESPPs and suggested that the withholding would be effective on January 1, 2003, leaving Congress with over a year to address the law.

During the past week the IRS held a public hearing at which members of the Securities Industry Association, the American Benefits Council, the Software Finance and Tax Executives Council, the American Payroll Association, the National Association of Stock Plan Professionals and others joined executives from Microsoft and Texas Instruments to speak out against the action.

Two bills that would overturn the plan are making their way through the Senate and voting is expected on them this summer. One bill is Senate Bill S 1383 and is sponsored by Senators Pat Roberts, R-KS, and Hillary Clinton, D-NY. The other is a bill sponsored by Representative Amo Houghton, R-NY. The Houghton bill has been attached to the Pension Security Act, HR 3762.

You may like these other stories...

BKD LLP adds Illinois accounting firm Wolf & Co.Springfield, Missouri-based CPA and advisory firm BKD LLP and Chicago-based accounting firm Wolf & Co. have agreed to merge, the firms announced on Monday. Wolf will...
A new government report on Monday found that the IRS may not be completing the required research steps in collecting delinquent taxes before considering the cases “not collectible.”The Treasury Inspector General...
The school year is off and running—have your start-up clients launched as well? It may make a big difference in tax status. If your clients can get their businesses up-and-running before the end of the year, they may...

Already a member? log in here.

Upcoming CPE Webinars

Oct 9In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards.
Oct 15This webinar presents the requirements of AU-C 600, Audits of Group Financial Statements (Including the Work of Component Auditors).
Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.