Employer Reporting of Stock Options
Employers that offer stock options are required to report specific information to the IRS.
Under final regulations § 1.6039-1 and § 1.6039-2, corporate employers are required to make an information return with the IRS, in addition to providing information to the employee, about the transfer of stock pursuant to the exercise of an incentive stock option (ISO), and certain stock transfers regarding employee stock purchase plans (ESPPs).
ISO Reporting
For ISOs, the information that is required in the information return to IRS and the statement furnished to employees consists of:
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The name, address, and employer identification number (EIN) of the corporation transferring the stock, or, if other than the corporation, the name, address and EIN of the corporation whose stock is being transferred;
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The name, address, and identifying number of the person to whom the share or shares of stock were transferred pursuant to the option exercise;
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The date the option was granted to the person;
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The exercise price per share, the date the option was exercised, and the fair market value of a share of stock on the date the option was exercised; and
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The number of shares of stock transferred pursuant to the exercise of the option.
ESPP Reporting
For transfers of stock by the employer under an ESPP where the stock was acquired pursuant to the exercise of an option described in Code Sec. 423(c), and where the exercise price is less than 100% of the value of the stock on the grant date or is not fixed or determinable on the grant date, the regs require the following information to be provided to IRS and the employee:
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The name, address, and identifying number of the transferor (the person who acquires the shares pursuant to exercising the option);
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The name, address and EIN of the corporation whose stock is being transferred;
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The date the option was granted to the transferor;
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The fair market value of the stock on the date the option was granted;
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The actual exercise price paid per share;
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The exercise price per share determined as if the option were exercised on the date the option was granted to the transferor (only required if the exercise price per share is not fixed or determinable on the grant date);
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The date the transferor exercised the option and the FMV on that date;
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The date the legal title of the shares was transferred by the transferor; and
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The number of shares to which legal title was transferred by the transferor.
Forms 3921 and 3922
To accomplish these reporting requirements IRS has developed two forms: Form 3921 is for ISO reporting and Form 3922 is for ESPP reporting.