IRS Form 3921 Exercise of an Incentive Stock Option Under Section 422(B)

What Is IRS Form 3921?

IRS Form 3921, Exercise of an Incentive Stock Option under Section 422(b) is a form filed with the Internal Revenue Service (IRS) by corporations that offer their employees an incentive stock option (ISO) described in Section 422(b). IRS Form 3921 is issued by the IRS and was last revised in October 2017. A fillable version of the form can be found below.

What Is Form 3921 Used for?

Any corporation that grants their employees an ISO uses IRS 3921 Form to report the IRS about their transfers of stock made to any transferee when that transferee exercises an ISO under Section 422(b). ISO is a type of employee compensation in the form of stock, which allows the employee to purchase stock, either in the employer's corporation or a parent or subsidiary, usually exercised at a price below the market price.

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Download IRS Form 3921 Exercise of an Incentive Stock Option Under Section 422(B)

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When Is Form 3921 Due?

The corporation will comply with their filing requirement as long as this form is properly addressed and mailed on or before the due date. The tax form 3921 due date is February 28, 2020, if filed on paper, or March 31, 2020, if the form is filed electronically. Should the filing due date fall on a weekend day or legal holiday, the form may be filed by the next business day. It is possible to get an automatic 30-day time extension to file by filing Form 8809.

If the corporation does not file a correct information return by the due date and no reasonable cause can be demonstrated, it may be subject to a late filing penalty. The amount of the penalty will be different depending on when the corporation files the 3921 form correctly. The penalty shall be as follows: (a) $50 per information return if they are correctly filed within 30 days (by March 30 if the due date is February 28); (b) $110 per information return if they are correctly filed more than 30 days after the due date but by August 1st; or $270 per information return if they are correctly filed after August 1st.

IRS Form 3921 Instructions

The corporation must file Form 3921 for each transfer made to their transferees, pursuant to the exercise of the option, during the calendar year. The corporation is also required to furnish a statement to the transferee whose name is set forth on the form by January 31st of the following year.

This form is comprised of four copies: Copy A is for filing with the IRS; Copy B is for furnishing the form to the transferee who exercised the ISO; Copy C is for the corporation whose stock was transferred, and Copy D is for the Transferor's records. The IRS provides general and specific instructions for this form.

How to Report IRS Form 3921?

This form may be filed either by mail or online. You must file online if you are required to file 250 or more forms. The basic information required to fill out the form includes the following:

  • Name of the employee who exercised ISOs in the calendar year
  • Employee's Taxpayer Identification Numbers (TINs)
  • Exercise Date of the ISO
  • Exercise Price of the ISO
  • Fair Market Value as of the exercise date
  • Number of shares acquired

If you file the form on paper, you may file it with one of the following IRS Centers, depending on where the corporation is located: Austin, TX; Kansas City, MO; and Ogden, UT. Corporations may order IRS Form 3921 copies online. Corporations are required to print Copy A of the form on special paper, which can be ordered from the IRS. Moreover, all paper submissions must be accompanied by Form 1096 as the transmittal document, and make sure that the filer's name, address, and TIN on Form 1096 coincide with the information on Form 3921. If after filing you discover that there are additional forms that must be filed, file them with a new Form 1096. Note that if you are filing online, you need to have an account in the IRS FIRE system.

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