Deadline Approaching for Reporting 2024 ISO Exercises and ESPP Share Transfers

The Internal Revenue Code¹ requires corporations to provide information statements to employees (including former employees) and information filings to the IRS regarding exercises of incentive stock options (ISOs) by employees and former employees. Similar information statements and filings are required for reporting transfers of shares of stock by employees and former employees that are purchased under an employee stock purchase plan (ESPP) designed to meet the requirements of Section 423 of the Internal Revenue Code. To satisfy the information return and statement requirements, companies will need to complete and file Form 3921 with respect to ISO exercises and Form 3922 with respect to ESPP share transfers, as applicable.

Forms and Instructions

The IRS instructions for Forms 3921 and 3922 may be obtained here. A Form 3921 or 3922 must be filed for each applicable stock transfer. For example, if on two occasions an employee exercised ISOs in 2024, then two Form 3921s must be completed for that employee.

Each form contains three copies. Copy A should be sent to the IRS, Copy B (known as the Information Statement) should be distributed to the employee or former employee whose ISO exercise or ESPP share transfer is being reported,² and Copy C should be retained by the company.

If a corporation is required to file 10 or more of either form with the IRS, such filing must be done electronically. Note that prior to 2024, electronic filing was required if a company was required to file 250 or more forms. Otherwise, paper filing with the IRS is acceptable.

Deadlines

With respect to ISO exercises and ESPP share transfers that occurred in 2024, Copy A of the respective form must be filed with the IRS no later than February 28, 2025, if filing on paper, or March 31, 2025, if filing electronically. A 30-day extension of the Copy A deadline may be requested and obtained by filing a Form 8809 — which may be obtained here — with the IRS before the original filing deadline. An extension request on Form 8809 may be filed electronically through the IRS FIRE Production System, which may be found here. Copy B of the respective form must be furnished to the applicable employee or former employee by January 31, 2025.³

^[1] Section 6039 of the Internal Revenue Code of 1986, as amended.
^[2] On Copy B, the copy provided to employees, it is permissible to truncate an employee’s Social Security number (or other tax ID number) so it shows only the last four digits. Copy A must include the full number.
^[3] Corporations should be aware that a federal tax penalty as high as $330 per information return may be imposed for negligently failing to file a correct Form 3921 and/or Form 3922 (unless there is a showing of reasonable cause).

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.