Section 5. Scope of Relief

A. Employer’s Information Reporting Requirements

If an employer complies fully with the provisions of section 4 with respect to an exercise of a stock right by an employee, the employer will not be required to report the § 409A inclusion amount with respect to such stock right exercise in box 12 of Form W–2 using code Z. If an employer complies fully with the provisions of section 4 with respect to an exercise of a stock right by an employee, but has already reported the § 409A inclusion amount with respect to such exercise of a stock right by an employee in box 12 of Form W–2 using Code Z, the employer may provide a Form

2007–9 I.R.B. 629 February 26, 2007

an employer withdraws a submission on or before June 30, 2007, the employer is entitled to a return of the funds submitted to the IRS, without interest. Where an employer modifies a further submission in a manner that reduces the § 409A taxes covered by the further submission, the employer may obtain a return of amounts previously submitted to the IRS consistent with such modification, without interest, provided such modification is submitted on or before June 30, 2007. After June 30, 2007, an employer may obtain a return of any amount paid to the IRS with respect to an employee pursuant to the announcement if the employer demonstrates that the employee for whom the § 409A taxes were paid has paid the § 409A taxes in full.

For information about this announcement, call (630) 493–5167 (not a toll-free number).

Flat Rate Supplemental Wage Withholding; Correction

Announcement 2007–21

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

SUMMARY: This document contains corrections to final regulations (T.D. 9276, 2006–37 I.R.B. 423) that were published in the Federal Register on Tuesday, July 25, 2006 (71 FR 42049), amending the regulations that provide for determining the amount of income tax withholding on supplemental wages. These regulations apply to all employers and others making supplemental wage payments to employees.

DATES: The correction will be effective January 1, 2007.

FOR FURTHER INFORMATION CONTACT: A. G. Kelley, (202) 622–6040 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the subject of these corrections are under sections 3401 and 3402 of the Internal Revenue Code.

is due to the employee’s failure to timely pay § 409A taxes arising from the exercise of an applicable stock right in 2006, and will not be subject to penalties for the 2006 tax year under § 6654 for any estimated tax underpayment attributable to such failure. An employee who received a notice of application under section 4.B.i of this announcement, requested an extension of time to file a return, and files a timely income tax return on extension after learning that he or she is not relieved of the duty to report and pay § 409A taxes due to a failure by the employer to comply with the requirements for relief set forth in this announcement, will not be subject to penalties under § 6651(a)(2) or § 6654 for the failure to timely pay § 409A taxes arising from the exercise of an applicable stock right in 2006, provided such § 409A taxes are paid with the filed return.

C. An Employer’s Failure to Comply with Representations or Other Actions Required under the Program

Information and representations required under this Program are material, and an employer who knowingly makes a false statement or representation will be deemed to have failed to make a further submission under the Program so that no relief under this Program is available to the employer or any employee. Except as provided in paragraph 5.B with respect to certain penalties, no relief is provided under this Program with respect to an employer or to an employee if the employer fails to comply with the requirements of this announcement, provided that the Commissioner may, in his sole discretion, determine that the employer has substantially complied with the requirements of this announcement with respect to some or all of the employees identified by the employer and that, accordingly, such employer and some or all of such employees are entitled to the relief provided under this announcement.

D. An Employer’s or Employee’s State and Local Information Reporting, Filing and Tax Requirements

Nothing in this Program relieves the employer or employee of any requirements regarding information reporting, filing of tax returns, or the payment of any taxes, to the extent such requirements relate to any

state or local tax. This includes any state or local tax information reporting requirement which relates to the Form W–2.