This means that if the restriction period ends in 2022, then you will report it in 2022 unless you sell the stock in 2022. Actually you do need to report the exercise of ISO stock if you did not sell all of the stock before year end, and you do that by entering Form 3921 into TurboTax. The interview you need is the “ISO Exercise and Hold” interview that’s in the “Investment Income” section. That’s where you’ll enter your Form 3921 and that’s where TurboTax gets its information for the AMT adjustment. A Form 3921 may not be required if the employee exercising ISOs is a nonresident alien and doesn’t need to be provided with a Form W-2. For more specifics about who must file Form 3921, see the IRS instructions.
About Form 3921, Exercise of an Incentive Stock Option Under Section 422(b)
- According to the Internal Revenue Service, all employers must file IRS Form 3921 for each calendar year that the company transfers any shares of stock pursuant to an employee’s ISO exercises during the year.
- So, enter the Form 3921 if you didn’t sell all the stock by year end using the “ISO Exercise and Hold” interview.
- If the employee is subject to AMT, it might be preferable to immediately sell the stock after exercising the option.
- To be on the safe side, you can enter the information contained in form 3921 in case you are subject to AMT or to have the information available for future sale of the stock.
- See part L in the current version of the General Instructions for Certain Information Returns.
- If you file the forms correctly more than 30 days after but prior to August 1st the fine increases to $120 per form filed with a cap of $1,891,500 per year or $630,500 per year for a small business.
As you enter your information in this section, your AMT, if any, will be displayed and if you must pay the AMT, TurboTax will include this tax on your return. This difference in tax treatment is a key reason why the IRS requires companies to provide Form 3921 as an informational tax form. If you file the forms correctly more than 30 days after but prior to August 1st the fine increases to $120 per form filed with a cap of $1,891,500 per year or $630,500 per year for a small business. If you file the forms correctly 30 days after the due date you will have to pay $60 per form with a cap of $630,500 per year or $220,500 per year for small businesses.
How to Report Stock Options on Your Tax Return
When you sell stock you’ve acquired via the exercise of any type of option, you might face additional taxes. When you exercise an option, you agree to pay the price specified by the option for shares of stock, also called the award, strike, or exercise price. RECORDS Your AMT basis in stock acquired through an ISO is likely to differ from your regular tax basis. Therefore, keep adequate records for both the AMT and regular tax so that you can figure your adjusted gain or loss.
Filing IRS Form 3921
The IRS uses this form to ensure that individuals are correctly reporting income related to equity compensation on their personal tax returns. You end up reporting no gain or loss on the stock sale transaction itself, but the $2,500 overall profit will be taxed at your ordinary tax rate. Because you exercised the options and sold the stock in the same year, you do not need to make an adjustment for Alternative Minimum Tax purposes.
Where can I find a copy of IRS Form 3921?
To file by mail you must request specific paper the forms from the IRS can be printed on. Due to the IRS’s processing machines, you cannot simply form 3921 turbotax print the forms from your computer on your office paper. As mentioned above you can choose to file your forms through the mail or electronically.
If you are required to file Form 3921, you must furnish a statement to the person whose name is set forth on Form 3921. In addition to these specific instructions, you should also use the current version of the General Instructions for Certain Information Returns. Those general instructions include information about the following topics. In the year that you exercise an Incentive Stock Option, the difference between the market value https://turbo-tax.org/ of the stock on the exercise date and the exercise price counts as income under the AMT rules, which can trigger an AMT liability. Absolutely nothing that you enter from Form 3921 is transmitted to the IRS in your income tax return so there’s no “matching” issues here. If you’re interested in learning more about Form 3921 or how Pulley can add clarity to your company’s equity or tax situation, schedule a call with us today.
If your address is incorrect, you should notify the lender and the IRS. Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed. I think it constitutes that I don’t have the right to transfer until 180 days after IPO.