No later than January 31, 2012, employers must provide information statements to their employees to report exercises of incentive stock options (ISOs) and transfers of stock under employee stock purchase plans (ESPPs) that occurred during 2011.

Form 3921 – ISO Exercises

With respect to each exercise of an ISO that occurred during 2011, the employer must deliver to the employee or former employee an information statement on IRS Form 3921 (or a substitute form meeting IRS guidelines) no later than January 31, 2012. The form must also be filed with the IRS by either February 28, 2012, if filing a paper return, or April 2, 2012, if filing electronically.

The Form 3921 (or substitute) must include the following information:

  • Name, address and EIN of the corporation transferring the stock;
  • Name, address and EIN of the corporation whose stock is subject to the ISO (if different from the corporation transferring the stock);
  • Name, address and identifying number of the employee (or former employee) to whom the shares were transferred;
  • Date of grant;
  • Date of exercise;
  • Exercise price per share;
  • Fair market value per share on the date of exercise;
  • Number of shares transferred as the result of the exercise; and
  • An account number, if multiple accounts exist for a person for whom multiple Forms 3921 are filed. (The IRS also encourages designation of an account number for all filings.)

Each Form 3921 can report only one transaction, so the employer must provide multiple Forms 3921 to an employee with multiple ISO exercise dates during 2011.

Form 3922 – Transfer of ESPP Stock

With respect to each transfer of stock acquired under an ESPP by an employee/former employee to another party (including to a broker or financial institution maintaining an account for the employee/former employee), the employer must deliver to the employee or former employee an information statement on IRS Form 3922 (or a substitute form meeting IRS guidelines) no later than January 31, 2012, and must file the form with the IRS by either February 28, 2012, if filing a paper return, or April 2, 2012, if filing electronically.

The Form 3922 (or substitute) must include the following information:

  • Name, address and EIN of the corporation whose stock was transferred;
  • Name, address and identifying number of the employee or former employee who transferred the previously acquired ESPP stock;
  • Date of grant;
  • Fair market value of the stock on the date the ESPP option was granted;
  • Exercise price per share;
  • Exercise price per share, determined as if the ESPP option was exercised on the grant date (only applicable if the exercise price was not fixed or determinable on the grant date);
  • Date of exercise;
  • Fair market value per share on the date of exercise;
  • Date the employee/former employee transferred legal title of the shares;
  • Number of shares transferred; and

  • An account number, if multiple accounts exist for a person for whom multiple Forms 3922 are filed. (The IRS also encourages designation of an account number for all filings.)

Penalties

Penalties of up to $100 per statement, up to a maximum of $1.5 million per calendar year ($500,000 for small businesses), may be assessed against an employer for failure to timely distribute complete and accurate copies of the forms to employees. Similar, separate penalties can also apply for the failure to timely file complete and accurate forms with the IRS. If the failure to file a correct information return is due to intentional disregard of the filing or correct information requirements, the penalty is at least $250 per information return with no maximum penalty.

Procedures for Filing with the IRS

Any employer filing more than 250 information statements on either Form 3921 or Form 3922 for the year must file that form electronically using the procedures in IRS Publication 1220. Employers filing less than 250 information statements may choose to file electronically or may file a paper return. The deadline for paper filers is February 28, 2012. The deadline for electronic filers is April 2, 2012. An automatic 30-day extension is available for both paper and electronic filers by filing Form 8809 prior to the applicable filing deadline.

Please note that even though copies of both Form 3921 and Form 3922 are available on the IRS website (www.irs.gov), these copies are provided by the IRS for informational purposes only and cannot be submitted to the IRS because they are not scannable. Official printed versions of Forms 3921 and 3922 may be ordered from the IRS by calling 1-800-TAX-FORM or may be ordered online.

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