Stock Plan Audits More Likely

An IRS pilot program surveying employer compliance indicates that stock options and executive equity compensation are likely to be high up on future IRS audit target lists. Among the issues the IRS intends to focus on are: whether requirements for incentive stock options are being met; whether companies are avoiding Section 162(m) rules for executive compensation by resetting performance targets so that, in effect, the awards are almost guaranteed; and whether transfers of options to family limited partnerships are being used to avoid taxes.