IRS to Hold Off on ESPP and Options Withholding Rule

For the last few years, the IRS has been raising the issue of whether companies should be withholding taxes on gains made from employee exercises of incentive stock options when there is a disqualifying disposition and on employee purchases of stock in an employee stock purchase plan. Under current rules, companies do not withhold taxes. Now the IRS has said (in Notice 2001-14) that it will put the issue on hold for two years while it seeks comments.