What are Forms 3921 and 3922?
Form 3921, Exercise of a Qualified Incentive Stock Option, and Form 3922, Transfer of Stock Acquired Through An Employee Stock Plan, are two tax information forms relating to employee stock that are required under the Tax Relief and Health Care Act of 2006. These forms are filed by certain corporations and apply to only certain stock transfers occurring after 2009.
Both forms must be provided to employees no later than Jan. 31. Additionally, these forms require that a separate form is filed for each transfer completed within the calendar year.
Here is an overview of some specifics for each form:
According to this form's instructions, the filing requirement applies to corporations that transfer shares of stock to any individual during the calendar year if that transfer is an incentive stock option per section 422(b) of the Internal Revenue Code (IRC). For this form and per section 7701(a) of the IRC, the definition of corporations includes: corporations issuing stock, agents of the corporation, any party that controls employee pay, any party that distributes stock or other types of payment under the plan and related corporations of the corporation.
The IRS has one exception to this rule, which is Form 3921 does not have to be filed if the individual is a nonresident alien and not issued a Form W-2, Wage and Tax Statement.. Guidelines for employees who are defined as nonresident aliens can be found in section 7701(b) of the IRC.
This form has a lengthier description of who must file and is required for the legal transfer of the title of a share of stock to an individual who exercises his or her employee stock purchase plan option. Per section 423(c) of the IRC, on the date the stock is granted, the exercise price cannot be fixed, determinable or exceed 100 percent of the stock's value.
"A return is required by reason of a transfer described in section 6039(a)(2) only for the first transfer of legal title of the shares by the transferor, including the first transfer of legal title to a recognized broker or financial institution," the form instructions read.
Corporations from which the stock is being transferred must file Form 3922, and the aforementioned guidelines for what constitutes a corporation apply in this case as well. The filing exception for Form 3921 applies for Form 3922.
For more information on Forms 3921 and 3922, check out our education section.