Form 3921

What Is Form 3921?

Form 3921 (Exercise of an Incentive Stock Option Under Section 422(b)) is an IRS information return that your employer must file whenever you exercise incentive stock options. The form reports key details about the transaction — the grant date, exercise date, exercise price per share, fair market value per share on the exercise date, and the number of shares transferred. Your employer sends copies to both the IRS and to you, typically by January 31 of the year following the exercise.

Form 3921 is informational only — it does not mean taxes were withheld or that you owe a specific amount. However, the data on this form is essential for calculating your AMT adjustment in the exercise year and your capital gains (or ordinary income) when you eventually sell the shares.

How Form 3921 Works

What Is Reported

The form contains six key data points:

• Box 1: Date option was granted — The original grant date of the ISO
• Box 2: Date option was exercised — When you exercised
• Box 3: Exercise price per share — Your strike price
• Box 4: Fair market value per share on exercise date — The 409A FMV at exercise
• Box 5: Number of shares transferred — How many shares you acquired
• Box 8: Exercise price per share (determined as if not an ISO) — Used for disqualifying dispositions; often the same as Box 3

When You Receive It

Employers must furnish Form 3921 to employees by January 31 of the year following the exercise year and file it with the IRS by February 28 (or March 31 if filed electronically). If you exercised ISOs in 2025, you should receive your Form 3921 by January 31, 2026.

Multiple Exercises

If you exercised ISOs on multiple dates during the year, you will receive a separate Form 3921 for each exercise event.

Practical Implications for Startup Employees

Calculating Your AMT Adjustment

The spread on your ISO exercise — Box 4 (FMV) minus Box 3 (exercise price) multiplied by Box 5 (number of shares) — is your AMT adjustment for the year. This is the number that flows to Form 6251 (Alternative Minimum Tax) on your tax return. If the spread is significant, it can trigger AMT liability.

Keep Form 3921 for Your Records

You will need Form 3921 when you eventually sell the shares to determine your cost basis and calculate whether the sale is a qualifying or disqualifying disposition. The grant date (Box 1) and exercise date (Box 2) are needed to check the ISO holding period requirements: the sale must occur more than two years after the grant date and more than one year after the exercise date for qualifying disposition treatment.

If You Do Not Receive Form 3921

Some companies, particularly smaller startups, may fail to issue Form 3921 on time. The obligation to report the ISO exercise on your tax return exists regardless of whether you receive the form. If you do not receive it by mid-February, contact your company's equity administration team. You should have your own records of the exercise — the exercise confirmation or equity plan administrator portal typically provides the same information.

Form 3921 Does Not Mean Tax Was Withheld

Unlike NSO exercises, ISO exercises do not trigger income tax withholding. Your employer does not withhold any taxes when you exercise ISOs. This means the AMT liability (if any) is entirely your responsibility to calculate and pay, either through estimated tax payments or with your annual tax return.

How It Relates to Exercising Stock Options

Form 3921 is the official tax document for your ISO exercise. When planning an exercise, understand that this form will be generated and filed with the IRS, creating a paper trail. Use the data from Form 3921 to calculate your AMT adjustment, establish your cost basis for future sales, and verify that your tax return accurately reflects the exercise. If you are working with a CPA or tax advisor, provide them with copies of all Form 3921s along with your brokerage statements and equity plan documents.