The IRS yesterday announced (IR-2007-30) that it will provide tax relief for rank-and-file employees affected by their companies’ issuance of backdated stock options.
If an employee exercised a backdated stock option in 2006, the employee may owe an additional 20% tax …. If the option had been properly priced, the employee normally would only have owed income tax on the difference between the value at the date of grant and exercise. The initiative, described in Announcement 2007-18, allows companies to step forward and pay the additional 20% tax and any interest tax that employees owe. The initiative does not permit the company to pay the additional tax for stock options exercised by its top executives or other insiders.
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