IRS Form 3921 is used to report the exercise of an incentive stock option. This form is used by corporations to document each transfer of stock to a person. If your corporation offers incentive stock options and you accept, you must file Form 3921 for each transfer.
Where to find Form 3921
If employees accept the incentive stock options (ISOs), then companies must file one form per ISO.
Each 3921 has three copies. Your company:
- Files copy A with the IRS, either electronically or by mail (deadline is 2/28 in paper; 3/31 electronically)
- Gives copy B to the employee who exercised options (deadline is 1/31)
- Keeps copy C for your company’s records
Companies that fail to fill out these forms or not submit them on time may accumulate hefty fines (listed below).
How to file Form 3921
You can file Form 3921 either by mail or online. If you have more than 250 documents to file, then you are required to file online. Before you begin filing, there are a few things you need to start:
- A list of employees who exercised ISOs
- Their tax ID’s
- Your company’s transmitter control code (TCC)
- If filing online, you’ll need an account on the IRS’ Filing Information Returns Electronically (FIRE) system
Failure to file Form 3921
If you fail to file the correct information or you’re late, you’re likely to be penalized. How much you pay depends on when you file the correct form.
Your business may end up paying as little as $50 or in the $100,000’s depending on the time and size of business.
- Within 30 days after the due date: $50 per form. The maximum penalty is $547,000 per year or $191,000 for small businesses
- More than 30 days after the due date, but by August 1st, you’ll pay $100 per form
- The maximum penalty is $1,641,000 per year or $547,000 for small businesses
- After August 1st, or if you never correctly file, you’ll pay $270 per form
- The maximum penalty is $3,282,500 per year or $1,094,000 for small businesses
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