US Treasury To Delay Payroll Tax On Stock Options

by Mike Godfrey, Tax-News.com, Washington

27 June 2002

The US Internal Revenue Service and Treasury Department announced on Tuesday that they will be extending a moratorium on the collection of payroll taxes for incentive stock options and employee stock-purchase plans, according to a Dow Jones Newswires report.

The IRS had previously announced that it would begin collecting payroll taxes on the two popular types of stock option in 2003, but the start date of January 1 was hotly contested by US businesses, who argued that the plan would be exceptionally difficult to administer.

Speaking to the news service on Tuesday, Pam Olsen, the Acting Assistant Treasury Secretary for Tax Policy revealed that a decision had been made to extend the moratorium indefinitely.

She explained that: 'Given the significant administrative changes that would be required of employers to implement the proposed withholding, it is clear that a delay in the effective date is necessary to provide employers with adequate time to make the required changes.'

According to the Dow Jones report, the delay is also necessary in order to allow the Treasury and the IRS to consider all the feedback received on the issue 'and to decide on an appropriate course of action.'

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