1099 Tax Software Blog

An Incentive Stock Option (ISO) is a way for corporations to attract and retain employees by granting the employee the right to purchase a certain number of shares of stock at a pre-established price.  The 2006 Tax Relief and Health Care Act (TRHCA) mandated that starting in 2011, a corporation must file an IRS Tax Form 3921 each time it transfers stock to an employee who has exercised an incentive stock option, with an exception made for employees who are non-resident aliens.  3921 software at the site 1099fire.com makes it easy to file IRS Tax Form 3921 by paper or electronically. Service bureau and mail house solutions are also available.

IRS Form 3921 includes such information as the date the option was granted, the date the employee exercised the option, the number of shares of stock transferred to the employee, the fair market value (FMV) of the stock when the option was exercised, and the exercise price of the stock. There is a space for the mailing address and federal identification number (FIN) of both the transferor and the employee, and for the name, address and EIN of the corporation issuing the stock, if other than the transferor.

Paper Filing, Electronic filing, Service Bureau…

Form 3921 can be filed by paper or electronically to the IRS. “Our 3921 software makes it easy to import from Excel, print and electronically filing IRS Form 3921 quickly and easily”, said Erich J. Ruth, Technical Support for 1099FIRE, a market-leading provider of 3921 software and services.  Sample Excel templates can be found on the website 1099fire.com which will import into the 1099FIRE software or technical support can guide you through the process of importing by phone or email.

Electronic reporting of information returns eliminates the need to submit paper documents to the IRS.  Electronically filed information may be submitted to the IRS 24 hours a day, 7 days a week.

“Electronic filing of Form 3921 is easy to do”, said  Ruth and  “The system is updated each year to reflect the format changes that are made by the IRS”. 1099FIRE software creates original, replacement, corrected and test files in the format required by the IRS for electronic transmission.

1099FIRE is the only company to offer One-Touch E-Filing. Just click a button and the software will automatically log in and upload your file to the IRS FIRE system. You will receive verification within seconds of receipt of your file.

Filing information returns can be stressful. 1099FIRE can eliminate the stress of filing information returns by electronically filing in a timely manner and at an affordable price. 1099FIRE will beat any competitor price; attain a quote for any service from any competitor and 1099FIRE will provide same, if not more complete, service at a lower price.

Visit the 1099FIRE website at www.1099fire.com or look for us on Facebook to stay up-to-date with important news, tax deadlines and the latest in compliance information.

Looking Ahead…

Furnish Copy B to the employee by January 31 of the year following the year of exercise to the IRS.  Furnish Copy C to the corporation whose stock is being transferred by January 31 of the year following the year of exercise of the ISO.

File Copy A of this form with the IRS by February 28 of the year following the year of exercise of the ISO. If you file electronically, the due date is March 31 of the year following the year of exercise of the ISO.

A corporation must file an IRS Tax Form 3921 each time it transfers stock to an employee who has exercised an incentive stock option, with an exception made for employees who are non-resident aliens. An incentive stock option is defined in section 422 b of the tax code as an option to purchase stock granted by a corporation to any individual in connection with her employment, with certain conditions having been met: The option must be granted under a plan that has been approved by the corporation’s shareholders and that specifies the total number of shares each employee is able to receive, and which classes of employees are eligible to receive options. The exercise price per share must not be less than the fair market value of stock at the time the option is granted and the employee cannot exercise the option more than ten years after that time.

Form 3921 includes such information as the date the option was granted, the date the employee exercised the option, the number of shares of stock transferred to the employee, the fair market value (FMV) of the stock when the option was exercised, and the exercise price of the stock. There is a space for the mailing address and federal identification number (FIN) of both the transferor and the employee, and for the name, address and FIN of the corporation issuing the stock, if other than the transferor.

Tax Form 3922 must be filed by a corporation that has during the previous calendar year transferred incentive stock to an employee under the particular conditions described by section 423c of the tax code. 423c involves a special rule that takes effect if the option is priced lower between 85% and 100% of the fair market value of the stock. It specifies that the employee (in the event of his timely disposition of the share, or death) is to have the amount by which the fair market value exceeded the price of the share remunerated to him as gross income. A return is required under these conditions laid out in 432c only for the first legal title for a share transferred.