Equity Compensation Tax Forms: ISO and ESPP Reporting

Equity Compensation Tax Reporting

Companies that grant stock options or maintain Employee Stock Purchase Plans (ESPPs) have specific IRS reporting requirements. Forms 3921 and 3922 are used to report stock option exercises and ESPP share transfers to both employees and the IRS.

These forms are filed through the IRS FIRE (Filing Information Returns Electronically) system and help employees determine the tax treatment of their equity compensation.

Form 3921: Incentive Stock Option Exercises

Form 3921 is used to report the exercise of Incentive Stock Options (ISOs). Corporations that grant ISOs under Section 422(b) of the Internal Revenue Code must file this form for each exercise during the tax year.

Key information reported on Form 3921:

• Date the option was granted
• Date the option was exercised
• Exercise price per share
• Fair market value per share on exercise date
• Number of shares transferred

Note: ISOs receive favorable tax treatment if holding period requirements are met. The difference between the exercise price and FMV may be subject to Alternative Minimum Tax (AMT).

Form 3922: ESPP Stock Transfers

Form 3922 is used to report the first transfer of legal title of stock acquired through an Employee Stock Purchase Plan (ESPP) that qualifies under Section 423 of the Internal Revenue Code.

Key information reported on Form 3922:

• Date the option was granted (typically the offering period start date)
• Date the option was exercised (purchase date)
• Fair market value per share on grant date
• Fair market value per share on exercise date
• Exercise price paid per share
• Number of shares transferred
• Date legal title was transferred

Note: The form is filed when shares are first transferred, which may be at purchase or when shares are moved to a personal brokerage account.

Filing Deadlines

Both Form 3921 and Form 3922 follow standard information return deadlines:

• Recipient copy: January 31
• IRS filing (paper): February 28
• IRS filing (electronic): March 31

Electronic filing is required for companies filing 10 or more returns. BoomTax makes bulk e-filing simple for companies with many stock option exercises or ESPP participants.

Who Must File These Forms?

Corporations that maintain qualifying stock option plans or ESPPs must file these forms. The filing obligation applies regardless of whether the company is public or private, as long as the plan meets the requirements of Section 422 (ISOs) or Section 423 (ESPPs).

Third-party administrators and stock plan service providers often handle filing on behalf of corporations.

E-File Equity Forms with BoomTax

E-file Forms 3921 and 3922 with the IRS using BoomTax. Our platform supports bulk filing for companies with hundreds or thousands of stock option exercises and ESPP participants.

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External Resources

• IRS: About Form 3921
• IRS: About Form 3922
• IRS: FIRE System Information