01.19.11

Employers are required to file Form 3921 and/or Form 3922 with the IRS and provide copies to employees that have exercised incentive stock options (ISOs) and/or received stock purchased under employee stock purchase plans (ESPPs). For ISO exercises and ESPP stock transfers that occurred in 2010, the information statement must be provided to employees by January 31, 2011.

Deadlines for Providing Information Statements to Employees and Filing with the IRS

Beginning in 2011, each stock transfer under an Incentive Stock Option Plan (ISO) or an Employee Stock Purchase Plan (ESPP) must be reported to the IRS and an information statement must be provided to the employee. These obligations, required under Internal Revenue Code Section 6039, are satisfied using Form 3921 (for ISOs) and Form 3922 (for ESPPs). For transfers that occurred in 2010, Copy B of Form 3921 (or Form 3922 for ESPPs) must be furnished to employees no later than January 31, 2011. Employers also must submit these forms to the IRS no later than February 28, 2011 (for paper filings) or March 31, 2011 (for electronic filings). The IRS will impose fines on employers who fail to comply with the new rules.

Form 3921 and Form 3922

Reporting on Form 3921 is triggered by exercise of an ISO.

Reporting on Form 3922 is triggered by the legal title transfer of shares purchased under an ESPP if (i) the purchase price of the shares was less than the fair market value (FMV) of the stock on the date of grant (generally the case for ESPP purchases) or (ii) the purchase price for the shares was not fixed or determinable on the grant date.

Only one transaction may be reported per Form 3921 (or 3922). For example, if an employee exercised an ISO on January 5, 2010, and exercised another ISO on June 5, 2010, then the company provides two Forms 3921 to both the IRS and the employee.

The IRS information versions of Forms 3921 and 3922 and instructions are available at http://www.irs.gov/instructions/i3921/ar02.html.

Scannable versions of Forms 3921 and 3922 are not available from the IRS website. This means that you cannot download the information versions of Forms 3921 and 3922 available on the IRS website to use for paper filing without incurring a penalty. Employers may order Forms 3921 and 3922 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676). When filing paper versions of Forms 3921 or 3922, be sure to include Form 1096 – Annual Summary and Transmittal of U.S. Information Returns.
 

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