IRS Form 3921 – Incentive stock options (ISOs) are a popular form of employee compensation, offering potential tax advantages. However, when employees exercise these options, companies must report the transaction using IRS Form 3921. This form, officially titled “Exercise of an Incentive Stock Option Under Section 422(b),” ensures compliance with tax regulations and helps employees calculate any alternative minimum tax (AMT) implications.
Whether you’re an employer managing equity compensation or an employee who has exercised ISOs, understanding Form 3921 is crucial. In this guide, we’ll cover everything you need to know, including its purpose, filing requirements, and step-by-step instructions. We’ll draw from official IRS resources to provide accurate, up-to-date information as of 2026.
What Is IRS Form 3921?
IRS Form 3921 is an information return used by corporations to report the transfer of stock to an employee or other person upon the exercise of an incentive stock option (ISO) under Internal Revenue Code (IRC) Section 422(b). It’s not a tax payment form but rather a reporting tool that informs the IRS about the details of the stock transfer.
The form captures key details such as the date the option was granted and exercised, the exercise price per share, the fair market value (FMV) on the exercise date, and the number of shares transferred. This information is essential for employees, as it helps them determine if the exercise triggers AMT. For instance, the difference between the FMV on the exercise date and the exercise price may need to be included in AMT calculations, even though no regular income tax is due at exercise.
Form 3921 is for informational purposes only and should be retained by employees for their records when calculating gains or losses upon selling the stock. It’s distinct from Form 3922, which reports transfers under employee stock purchase plans (ESPPs).
Who Must File Form 3921?
Every corporation that transfers stock pursuant to an ISO exercise in a calendar year must file Form 3921 for each such transfer. The term “corporation” broadly includes:
- The issuing corporation.
- Related corporations.
- Agents of the corporation.
- Parties distributing shares (e.g., brokerage firms).
- Parties controlling employee remuneration payments.
An exception applies: No Form 3921 is required for ISO exercises by nonresident aliens (as defined in IRC Section 7701(b)) if the corporation isn’t obligated to provide them a Form W-2 during the period from option grant to exercise.
This requirement applies to both private and public companies. If your company offers ISOs as part of its equity compensation plan, you’ll need to file one Form 3921 per exercise event per person.
When and How to File Form 3921?
Filing Deadlines
- Furnish to Employees: Provide Copy B of Form 3921 to the employee (or former employee) by January 31 of the year following the exercise year. For 2025 exercises, this is due by January 31, 2026.
- File with IRS: Submit Copy A to the IRS. If filing electronically, the deadline is March 31. For paper filings (allowed if fewer than 10 forms), it’s February 28. These apply to the year following the exercise.
Electronic filing is mandatory if you have 10 or more information returns (aggregated across types) to file, per updates from the Taxpayer First Act and Treasury Decision 9972 (effective for returns due after January 1, 2024). Use the IRS’s Information Reporting Intake System (IRIS) for e-filing.
How to File?
- Electronic Filing: Preferred for efficiency; use IRIS or authorized software.
- Paper Filing: Mail to the IRS Service Center based on your location (see General Instructions for Certain Information Returns).
- Corrections: If errors are found, file corrected forms promptly.
Retain Copy C for your records.
How to Fill Out Form 3921: A Box-by-Box Guide?
Form 3921 (Rev. April 2025) includes the following fields. Use the latest version from IRS.gov.
| Box/Field | Description | What to Enter |
|---|---|---|
| Transferor’s Name, Address, and TIN | Identifies the entity transferring the stock. | Name, full address (including city, state, country, ZIP), and Taxpayer Identification Number (TIN). |
| Employee’s TIN | Employee’s tax ID. | SSN, ITIN, ATIN, or EIN. Truncate on employee statements (e.g., XXX-XX-1234), but not on IRS filings. |
| Employee’s Name and Address | Employee details. | Full name and complete address. |
| Account Number | Optional but encouraged. | Unique identifier for multiple accounts. |
| Box 1: Date Option Granted | Grant date. | Date the ISO was granted (e.g., MM/DD/YYYY). |
| Box 2: Date Option Exercised | Exercise date. | Date the option was exercised. |
| Box 3: Exercise Price Per Share | Price paid per share. | Dollar amount (e.g., $10.00). |
| Box 4: Fair Market Value Per Share on Exercise Date | FMV at exercise. | Market value per share on exercise date. |
| Box 5: Number of Shares Transferred | Shares involved. | Whole number of shares. |
| Box 6: If Other Than Transferor… | Alternate corporation info. | Name, address, and TIN if stock isn’t from the transferor. |
For detailed instructions, refer to the official IRS guidelines.
Penalties for Non-Compliance
Failure to file Form 3921 on time, furnish statements to employees, or report accurate information can result in penalties. These range from $60 to $630 per form, depending on the delay and whether it’s intentional. Higher penalties apply for failures involving backup withholding or TIN mismatches. Always consult the General Instructions for Certain Information Returns for specifics.
Recent Updates and Changes for 2026
As of February 2026, the latest revision of Form 3921 is April 2025, applicable for tax year 2025 and beyond. Key changes include:
- Reduced e-filing threshold to 10 returns (from 250), effective since 2024.
- Introduction of the IRIS portal for easier online filing.
- Online fillable PDFs for Copies B and C.
No major content changes to the form itself, but always check IRS.gov for updates.
Frequently Asked Questions About IRS Form 3921
Do employees report Form 3921 on their tax returns?
No, it’s informational. Use it to calculate AMT or basis for future sales.
What if the stock is sold in the same year as exercise?
No AMT adjustment is needed if disposed of in the same year.
Where can I download Form 3921?
From the IRS website: Form 3921 PDF. Instructions are at Instructions for Forms 3921 and 3922.
For personalized advice, consult a tax professional. This article is for educational purposes and based on current IRS guidance as of 2026.