Executive Summary
What is Equity Compensation Reporting: Forms 3921, 3922, W-2 Explained?
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Overview of Forms 3921, 3922, and W-2 for Equity Compensation Reporting
Forms 3921 and 3922 report specific equity compensation events under Internal Revenue Code (IRC) Section 6039, while Form W-2 reports broader wage income including certain equity compensation amounts. Employers must furnish Forms 3921 and 3922 to employees by February 2, 2026, for 2025 transactions, and file copies with the IRS by March 2, 2026 (paper) or March 31, 2026 (electronic).[1][2]
Form 3921: Exercise of Incentive Stock Option (ISO)
Form 3921 is required when an employee exercises an incentive stock option (ISO) under IRC §422, reporting the transfer of stock to the employee.[2]
- Trigger: Exercise date, regardless of payment method.
- Key Boxes:
- Box 1: Date option granted.
- Box 2: Date option exercised.
- Box 3: Exercise price per share.
- Box 4: Fair market value (FMV) per share on exercise date.
- Box 5: Number of shares transferred.
- Box 6: If readily tradable, include employee address.
- No income tax due on exercise for qualifying ISOs (alternative minimum tax may apply), but reporting informs IRS of potential disqualification.[2]
- Example: Employee exercises ISO for 1,000 shares at $10/share (exercise price) when FMV is $50/share. Report: Box 3 = $10, Box 4 = $50, Box 5 = 1,000. Bargain element ($40/share × 1,000 = $40,000) is tracked for future AMT or disqualification.[2]
- Source: Form 3921 Instructions (2025); 26 U.S. Code § 6039; Treas. Reg. §1.6039-1.
Penalties for late filing: $60–$340 per return under IRC §6721 (sliding scale based on delay); $680+ for intentional disregard (no maximum). Separate penalties under §6722 for failing to furnish to employee.[1]
Form 3922: Transfer of Stock Under Employee Stock Purchase Plan (ESPP)
Form 3922 report
Footnotes
Primary Sources
| Source | Type | URL |
|---|---|---|
| Form 3921 Instructions (2025) | Reference | https://www.irs.gov/pub/irs-pdf/i3921.pdf |
| 26 U.S. Code § 6039 | Reference | https://www.law.cornell.edu/uscode/text/26/6039 |
| Treas. Reg. §1.6039-1 | Reference | https://www.law.cornell.edu/cfr/text/26/1.6039-1 |
| Form 3922 Instructions (2025) | Reference | https://www.irs.gov/pub/irs-pdf/i3922.pdf |
| 26 U.S. Code § 6039 | Reference | https://www.law.cornell.edu/uscode/text/26/6039 |
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