Company-employers have until today, February 28, 2007, to notify the Internal Revenue Service of their intent to participate in an initiative aimed at providing relief for rank-and-file employees affected by the issuance of backdated and other “mispriced stock options,” according to a recent IRS release.

“This shameful practice was widespread,” says Commissioner Mark Everson. “We are allowing employers to satisfy the tax obligation of employees who did not knowingly participate in these schemes.”

The program permits employers to pay the additional 20% tax, plus interest, that any “unknowing” employee would otherwise owe (under §409A) on a backdated option exercised in 2006. “The initiative does not permit the company to pay the additional tax for stock options exercised by its top executives or other insiders.” For complete details, see IRS Announcement 2007-18.