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By Michael Gray

It's time for year-end planning

There are only two months left of this year. How is your tax situation developing?

Especially if you had a very high tax for 2000, you should meet with your tax advisor to be sure you're in good shape for 2001.

Are your withholding and estimated tax payments sufficient to avoid penalties for underpayment of estimated tax?

Are you holding shares received from exercising an ISO early this year that has declined in value? Maybe you should sell those shares before the end of the year to use the "escape hatch"? (Watch the wash sale rules.)

Will you have AMT capital losses that will be limited for 2001? Do you have any capital gains you can take to get the tax benefit of those losses, including using minimum tax credits?

How much cash will you need to pay any balance of your tax liability in April?

Separate W-2 reporting of employee option income not required for 2002

The IRS has announced that employers will not be penalized for failing to report income from employee stock options using Code V at Box 12 of Form W-2 for 2002, as also applies for 2001.

The IRS is studying whether a less burdensome and more cost-effective method of reporting this information can be developed. If it can't develop an alternative approach, the separate reporting of the income will be mandatory for 2003 Form W-2. (Announcement 2001-92.)

Upcoming Employee Stock Option Seminars

We are offering two seminars this fall called "Secrets of Tax Planning For Employee Stock Options." One will be November 29 and 30, 2001 for tax advisors, and the other will be December 1, 2001 for option holders. For more information, fill out our form.

IRS Circular 230 Disclosure:

As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this communication was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Consult with a tax advisor

For our readers who aren’t tax advisors, this newsletter is intended to alert you about tax issues that could affect you. It is not a substitute for advice from a professional tax advisor. You will find that getting advice from a qualified advisor is a worthwhile investment. We intend to eventually publish a directory of ESOAA members who are committed to helping clients with employee stock option issues.

Tax advisors should view the newsletter as an alert to become aware of issues relating to employee stock options for further research and study.

(Michael Gray is the co-author of Employee Stock Options – A Strategic Planning Guide for the 21st Century Optionaire. You can order the book at http://www.amazon.com or http://www.barnesandnoble.com/ or buy it at Stacey’s Books.)

P.S.

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