Participant Resources for Tax Season

The volume of participant inquiries can ebb and flow, but perhaps one of the most predictable times of year for stock plan related questions (and guidance needs) is tax season.

You’ve been busy working with payroll and accounting to capture, audit and report last year’s stock compensation income for plan participants and now your employees are busy preparing for their tax return filings. The following are some suggested ways to enhance your support for participants while they tackle their tax returns. 

Provide examples of how stock plan transactions are recorded on Forms W-2 or 1099 

Get ahead of questions by including annotated examples of how stock plan transactions were reported to the IRS. The sample form below shows how the gain on exercise of nonqualified stock options were reported on the employee’s W-2.

Tip for NASPP members: Additional sample forms for other equity types, non-employees, and special situations (death, divorce) are available in the presentation of our 2020 Tax Reporting Essentials webcast.

Leverage Financial Wellness Partners for Stock Plan Tax Related Education

You should be prepared to guide your stock plan participants through a myriad of questions around how the company handles tax withholding and reporting of plan transactions. However, these questions are likely to be the tip of the iceberg for the participant, as they now must figure out how to complete their tax returns. Most companies shy away from providing outright tax advice, for good reason: the stock plan department is likely not full of qualified tax advisors. However, assisting your participants in gaining access to helpful resources is not outside the realm of what the company can do to help ensure a smooth tax season.

Many companies have adopted financial wellness programs that include access to advisors who can assist not only in wealth management or financial education and goal setting, but navigate through tax considerations as well. If you have a financial wellness plan/partner in place, you may be able to utilize that resource to educate employees about the tax return process. If you don’t have such a program, you may want to consider implementing one, as studies have shown a correlation between increased participant knowledge, satisfaction and engagement when they have the support of this type of benefit.

For additional information on participant views relative to financial wellness programs, see the NASPP blog: The Value of Financial Wellness Benefits in Times of Turmoil (and Beyond)
 

Participant Focused Stock Plan Resources Offer a Wealth of Information

With or without a financial wellness program, another option to keep employees informed about the tax reporting and return process for stock plan transactions is use of a participant-centric educator, like myStockOptions.com. This company focuses exclusively on the participant’s point of view, providing resources and information about stock plans from that perspective. myStockOptions.com has a full tax center aimed at addressing questions, with a myriad of articles, quizzes and other tips. A recent article, “Tax Season 2021: What You Must Know About New Reporting Rules” explains to employees with income from stock compensation or sales of company stock what they need to know about tax returns for the 2020 tax year.

Don’t Ditch Participant Meetings and Q&A Sessions

The COVID-19 pandemic has many companies still operating with all or portions of their workforce  remote. This means in-person meetings, Q&A sessions and office drop ins are unlikely to be options to broadly engage with employees this tax season. Should you ditch the concept of offering meeting and office hours to employees? In my opinion, the answer is NO! Instead, consider adapting these methods of engagement to remote platforms.

Virtual meeting platforms like Zoom offer the ability to conduct employee education in a way that can still resonate. Instead of an in-person meeting, offer a virtual meeting. The meeting can be recorded and made available to those who can’t attend. Similarly, offering virtual office hours via a web platform allows employees to drop in to ask their questions.  Teachers and educators have been offering virtual drop-in hours to students throughout this pandemic. The concept is simple – set aside a couple of hours, provide a link, and allow employees to drop in. This offers a set window for questions and allows employees to gain access to you via a small group or individual basis.

Some of these meeting concepts can and should outlive the pandemic. It’s time to rethink how we educate employees and some of these avenues may have long-term staying power in your stock plan education strategy. In the meantime, consider which resources will best help you assist your stock plan participants in navigating this year’s tax season.