IRS Form 3921 is a new form businesses were required to report in 2011 for Incentive Stock Option (ISO) exercises occurring in 2010. An ISO is the right to purchase a certain number of shares of stock at a pre-established price.
The top of IRS Form 3921 asks for the transferor name and address and the employee name and address. The business or transferor is required to prepared IRS Form 3921 and the recipient must recognize (report) gain or loss on their tax return for the year in which they sell or otherwise dispose of the stock.
The form also asks for the account number. The account number is just a unique number that the employer uses to distinguish this employee’s account. If you are electronically submitting files with 250 records or more to the IRS, then you need an unique account number. If you are submitting more than one 3921 for the same employee, then you need a unique account number.
There are 6 boxes on IRS Form 3921. Each box is discussed below:
Box 1. Shows the date the incentive stock option to purchase was granted to the employee.
Box 2. Shows the date the employee exercised the option and purchased the stock at a pre-established price.
Box 3. Shows the exercise price per share of stock which was pre-established between the employer and employee.
Box 4. Shows the fair market value (FMV) of a share of stock on the date the option was exercised. Here the IRS wants to know how good (or bad) of a deal you received.
Box 5. Shows the number of shares of stock transferred from the employer to the employee at the exercise price shown in Box 3.
Box 6 is optional and shows the name, address and EIN of the corporation whose stock is being transferred to the employee if this corporation is not already shown in the upper left corner of the IRS 3921 form.
The 2006 Tax Relief and Health Care Act (TRHCA) mandated that started in 2011, a corporation must file an IRS Tax Form 3921 each time in transfers stock to an employee who has exercise an incentive stock option, with an exemption made for employees who are non-resident aliens.
