Download IRS Form 3922 Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(C)
What Is ESPP?
The Employee Stock Purchase Plan (ESPP) is a benefit plan within a corporation that allows employees to purchase shares of the corporation at a discounted price, i.e., below their fair market value or at a price not fixed on the date of grant. This program may be supported through a fixed dollar amount contribution or payroll deductions of the employees who choose to participate. The employee does not begin to owe tax on the Employee Stock Purchase Plan until after they sell or dispose of the shares, based on any gains. The ESPP rules set forth holding periods and other requirements in order to receive favorable tax treatment when shares are sold. The ESPP disposition may be qualified or non-qualified based on the compliance with these requirements and holding period, which will affect the tax benefits offered to the employee.
What Is the Purpose of Form 3922?
Tax Form 3922 is used for providing the IRS with information. However, this information is not included in the employee's return. Employees should keep this form in their records, and use the information at the time they dispose of their shares. When employees dispose of their stock, they receive Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, which contains the information that must be reported on their tax return.
Employees report gain or loss on their tax return for the year in which they sell or otherwise dispose of the stock, and the information on Form 3922 will be used to determine the cost, the holding period, and other relevant data.
How to File Form 3922?
The form may be filed either by mail or online. You must file online if you are required to file 250 or more forms. 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 are required to print Copy A of Form 3922 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 3922. If after filing you discover additional forms that must be filed, file them with a new Form 1096, but do not staple them together. Note that if you are filing online, you need to have an account in the IRS FIRE system.
IRS Form 3922 Instructions
The corporation will comply with their filing requirement as long as this form is properly addressed and mailed on or before the due date. Form 3922 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.