IRS Form 3922 – In today’s competitive job market, many companies offer employee stock purchase plans (ESPPs) as a valuable benefit, allowing workers to buy company shares at a discount. However, these perks come with tax implications, and that’s where IRS Form 3922 comes into play. This form is essential for reporting the transfer of stock acquired through a qualified ESPP under Internal Revenue Code Section 423(c). Whether you’re an employer handling compliance or an employee navigating your tax return, understanding Form 3922 ensures accurate reporting and avoids potential penalties. In this SEO-optimized guide, we’ll break down everything you need to know about IRS Form 3922, including its purpose, filing requirements, and recent updates for tax year 2025.
What Is IRS Form 3922?
IRS Form 3922, titled “Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c),” is an information return used by corporations to report specific stock transfers. It documents the first transfer of legal title to shares acquired by an employee through an ESPP where the exercise price meets certain conditions—specifically, when the price is less than 100% of the stock’s fair market value (FMV) on the grant date or isn’t fixed/determinable on that date.
This form doesn’t report taxable income at the time of exercise; instead, it provides data for employees to calculate gains or losses when they sell or dispose of the stock. No income is recognized upon exercising the option in a qualified ESPP, but the information on Form 3922 helps determine your cost basis and holding period for capital gains tax purposes. For more details on taxable events, refer to IRS Publication 525, Taxable and Nontaxable Income.
Purpose of Form 3922
The primary goal of Form 3922 is to track and report stock transfers from qualified employee stock purchase plans to ensure proper tax compliance. It applies specifically to Section 423(c) plans, which are designed to give employees a stake in their company’s success while offering tax advantages. By filing this form, corporations provide the IRS and employees with key details like grant dates, exercise prices, and FMVs, which are crucial for accurate tax reporting upon disposition of the shares.
For employees, receiving Copy B of Form 3922 is informational—it’s not entered directly into your tax return but aids in computing gains or losses on Form 8949 and Schedule D when selling the stock. This helps avoid overpaying taxes by correctly adjusting your basis.
Who Must File IRS Form 3922?
Corporations (or their transfer agents) are responsible for filing Form 3922 for each qualifying stock transfer in a calendar year. This includes:
- The corporation issuing the stock.
- Any agent of the corporation.
- Parties distributing shares or payments under the plan (e.g., brokerage firms).
- Parties controlling employee remuneration payments.
A form is required only for the first transfer of legal title by the employee (transferor), such as depositing shares into a brokerage account. Shares must be identifiable, often via unique serial numbers or certificates.
Exceptions: No filing is needed for transfers by nonresident aliens if no Form W-2 is required during the relevant period.
Filing Requirements and Due Dates for Form 3922
Follow the General Instructions for Certain Information Returns for comprehensive guidelines on filing. Key points include:
- Electronic Filing: Mandatory if filing 10 or more information returns (aggregated) for returns due on or after January 1, 2024. Use the IRS’s Information Reporting Intake System (IRIS) portal.
- Paper Filing: Allowed for fewer than 10 returns; mail Copy A to the IRS.
- Due Dates: Furnish statements to employees by January 31 following the calendar year of transfer. File with the IRS by February 28 (paper) or March 31 (electronic) of the following year.
- Account Numbers: Assign unique numbers for multiple forms per employee.
- TIN Truncation: Allowed on employee statements but not on IRS filings.
Online fillable versions of Copies A and B are available on the IRS website to simplify the process.
How to Complete IRS Form 3922: A Box-by-Box Guide?
Form 3922 (Rev. April 2025) includes the following boxes, which must be filled accurately:
| Box Number | Description | Details |
|---|---|---|
| Box 1 | Date Option Granted | Enter the grant date of the option (YYYY-MM-DD). |
| Box 2 | Date Option Exercised | Enter the exercise date (YYYY-MM-DD). |
| Box 3 | Fair Market Value Per Share on Grant Date | FMV per share on the grant date. |
| Box 4 | Fair Market Value Per Share on Exercise Date | FMV per share on the exercise date. |
| Box 5 | Exercise Price Paid Per Share | Price paid per share at exercise. |
| Box 6 | Number of Shares Transferred | Whole number of shares transferred. |
| Box 7 | Date Legal Title Transferred | Date of first transfer (YYYY-MM-DD). |
| Box 8 | Exercise Price Per Share Determined as if Exercised on Grant Date | If not fixed on grant date, enter hypothetical price; otherwise, leave blank. |
Also include the corporation’s and employee’s names, addresses, and identification numbers (EIN for corporation, SSN/ITIN for employee).
Statements to Employees and How They Use Form 3922
Corporations must provide Copy B to the employee (transferor) by the due date. Employees use this to report stock sales on their tax returns, adjusting basis to reflect any compensation income. For example, it helps calculate ordinary income on disqualifying dispositions or capital gains on qualifying ones.
Penalties for Not Filing Form 3922
Failure to file or furnish accurate forms can result in penalties ranging from $60 to $630 per form, depending on timing and intent, as outlined in the General Instructions for Certain Information Returns. Higher penalties apply for intentional disregard.
Recent Updates for Tax Year 2025
The latest revision (April 2025) includes e-filing thresholds reduced to 10 returns, the introduction of the IRIS system, and online fillable forms. These changes stem from the Taxpayer First Act of 2019 and aim to streamline reporting. Always check the IRS website for the most current version.
Conclusion
Navigating IRS Form 3922 is crucial for compliant handling of employee stock purchase plans under Section 423(c). By understanding its requirements, employers can avoid penalties, and employees can accurately report taxes. For the official form, download the PDF from the IRS: https://www.irs.gov/pub/irs-pdf/f3922.pdf. Consult a tax professional for personalized advice, as this guide is for informational purposes only. Stay updated with IRS resources to ensure smooth tax seasons ahead.