Form 3921: Incentive Stock Option Statement Explained

Form 3921 is the statement your employer sends when you use an incentive stock option (ISO) to buy company stock. The full title is "Exercise of an Incentive Stock Option Under Section 422(b)." The current revision is dated April 2025. The IRS says those instructions apply to tax year 2025 and later years until a newer revision is issued. IRS: Form 3921 (Rev. April 2025)

Who sends the form

A corporation must file Form 3921 for each transfer of stock it makes to a person who exercised an ISO during the year. The instructions also cover agents of the corporation and brokerage firms that distribute the shares. IRS: Instructions for Forms 3921 and 3922 (Rev. April 2025)

The instructions give one exception. A nonresident alien employee does not need a Form 3921 if the corporation was not required to give that employee a Form W-2 for the years from the grant year through the exercise year. IRS: Instructions for Forms 3921 and 3922 (Rev. April 2025)

What each box shows

Box 1: the date the option was granted.
Box 2: the date you exercised the option.
Box 3: the amount you paid per share to exercise the option.
Box 4: the fair market value (FMV) of one share on the exercise date.
Box 5: the number of shares transferred to you.
Box 6: the name, address, and TIN of the corporation whose stock was transferred. Fill this in only when that corporation is not the one in the top left box.

The form may show only the last four digits of your Social Security number. The employer has reported your full number to the IRS. IRS: Form 3921, Instructions for Employee

What to do with Copy B

You receive Copy B. The employee instructions say to keep it and use it to figure your gain or loss when you sell or otherwise dispose of the stock. They also say you may have to include part of the stock's FMV in alternative minimum taxable income in the year you exercise. For that part, see Form 6251 and its instructions. IRS: Form 3921 (Rev. April 2025)

The employer also sends a copy to the IRS. Copy B warns that if you are required to report an item and the IRS finds it was not reported, a negligence penalty or other sanction may be imposed. IRS: Form 3921 (Rev. April 2025)

Form 3922 is a different form

Form 3922 covers stock bought through an employee stock purchase plan under section 423(c). An ISO and an employee stock purchase plan are different. Check which form you received before you use its numbers. IRS: Instructions for Forms 3921 and 3922 (Rev. April 2025)

Records to keep

Keep your option grant papers, your exercise paperwork, Copy B, and your broker's statements. Copy B says to keep it for your records. Form 3921 gives the dates, the per-share amounts, and the share count that you need. The other papers show the rest of the story, such as your payment records and your sale dates. IRS: Form 3921 (Rev. April 2025), Copy B

Where the numbers go

Stock sales are reported on Form 8949 and Schedule D. Read stock and crypto sales on your return for that step. For the AMT side of an ISO exercise, read alternative minimum tax basics.

Steps to follow

When Form 3921 arrives, check each box against your option papers and exercise notice.
Keep Copy B with your stock records.
In the year you exercise, check whether the AMT rules may apply to you.
When you sell, use the Form 3921 figures to work out the gain or loss, and report the sale.

Read the capital loss limit and carryover if a sale of stock produces a loss. Read Form 6781 basics for another form that splits gains by rule.

General information, not advice for your situation.

Sources: Sources: IRS, Form 3921 (Rev. April 2025), Exercise of an Incentive Stock Option Under Section 422(b) (https://www.irs.gov/pub/irs-pdf/f3921.pdf); IRS, Instructions for Forms 3921 and 3922 (Rev. April 2025) (https://www.irs.gov/pub/irs-pdf/i3921.pdf); IRS, Form 6251 (https://www.irs.gov/pub/irs-pdf/f6251.pdf) This is general information, not advice about your specific return.

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