Filing Form 3921

All corporations must file Form 3921 if they have transferred a share of stock to an employee during the calendar year. The transfer must be pursuant to an employee's execution of an incentive stock option. This form must be filed for each transfer made during the year. The corporation need not file Form 3921 if the employee is a nonresident alien and does not revive the W-2 form.

A corporation includes:

• the corporation that issues the stock
• a corporation related to the corporation that issues the stock
• an agent of the corporation
• third parties such as brokerage firms that distribute the shares of stock and other payments related to the plan
• third parties responsible for payment of employee remuneration

A corporation filing Form 3921 must provide a statement to the employee to whom the transfer is made and whose name appears on the form. On Form 3921 the employee's name, address and tax identification number must be entered. A corporation must designate an account number if it has multiple accounts for an employee for whom the corporation is filing multiple Form 3921.

The date on which the stock option was granted must be entered in Box 1 while the date on which the option was exercised must be entered in Box 2. In Box 3, the exercise price per share must be entered while Box 4 is for the fair market value of the share on the exercise date. The total number of share that have been transferred to the employee must be entered in Box 5. Box 6 must be completed by third parties other than the corporation if they are filing the Form on behalf of the corporation.

The reporting obligation for a corporation arises when an incentive stock option is exercised by an employee. In case of an employee stock purchase plan, the obligation arises when the employee transfers the stock received through the purchase plan to someone else. This obligation arises even if the transfer is made to an account of the employee maintained by a financial institution or broker. In case of an employee stock purchase plan, the obligation to report arises only when the exercise price is less than 100% of the value of the stock on the date on which it was granted or where the exercise price is not determinable or fixed on the date on which the stock was granted. Form 3922 must be used to report transfer made under an employee stock purchase plan.

The corporation must submit the form to the IRS by February 28. In case of electronic filing, the form must be filed by March 31. Corporations with more an 250 exercises in 2013 must file electronically. Failure to file the forms by the due date can prove costly. Corporations that fail to file the forms by the due date can be subject to penalties ranging from $100 to $1,50,000 per year. The penalty will be waived if the corporation is able to show reasonable cause for failure to file by the due date.