Executive Compensation, Employment & December 5, 2022 - Number 3038 - Reminder: Employers Must Report 2022 ISO and ESPP Transactions

Sep 19, 2026

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Reminder that employers offering incentive stock options (ISOs) or maintaining an employee stock purchase plan (ESPP) must report 2022 employee option exercises and ESPP purchases to the IRS and deliver required information statements to employees and former employees. The document explains filing via Forms 3921 (ISOs) and 3922 (ESPPs), what data must be included, how copies are delivered, key deadlines for furnishing and filing, and potential penalties for late or incorrect filings, including higher penalties for intentional failures and certain caps for aggregate liability.

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Reminder: Employers Must Report 2022 ISO and ESPP Transactions

Forms and how reporting is satisfied

What must be included in the returns and information statements

How information statements are delivered

Deadline for furnishing and filing

Penalties for noncompliance

Exceptions

Latham & Watkins Executive Compensation, Employment & December 5 , 2022 | Number 3038 Benefits Practice Reminder: Employers Must Report 2022 ISO and ESPP Transactions Deadlines are approaching for employers to report employee exercises of incentive stock options and employee stock purchase plan purchases during 2022. Corporations that offer incentive stock options (ISOs) or maintain a tax-qualified employee stock purchase plan (ESPP) must file returns with the Internal Revenue Service ( IRS) . They must also deliver information statements to employees and former employees regarding the acquisition of shares under such arrangements. These filing obligations are intended to provide employees and former employees with sufficient information to enable them to calculate their tax obligations. How are the reporting requirements satisfied? The IRS has issued two forms (and instructions): Form 3921 is used to report ISO exercises, and Form 3922 is used for ESPP share purchases. A separate form must be provided and filed for each exercise or purchase during the calendar year. For example, if an employee exercised multiple ISO awards during a calendar year, the employee must receive a copy of Form 3921 for each exercise , and the corporation will be required to make multiple return filings with the IRS. What must be included in the returns and information statements? The applicable form is used for both the return and information statement (filing Copy A of the applicable form with the IRS, providing Copy B to the employee or former employee, and retaining Copy C for the corporation’s records) . • Form 3921: Returns and Information Statements Related to ISOs. The information corporations must report on Form 3921 with respect to ISO exercises includes the following: – The name, address, and taxpayer identification number of the corporation transferring the shares (and the corporation whose shares are being transferred, if different) – The name, address, and taxpayer identification number of the employee or former employee to whom the shares are transferred – The grant date, exercise price per share, date of exercise, fair market value per share on the date of exercise, and the number of shares acquired upon exercise of the ISO • Form 3922: Returns and Information Statements Related to ESPPs. The information employers must report on Form 3922 with respect to ESPP share purchases includes the following: – The name, address, and federal identification number of the corporation whose shares were purchased – The name, address, account number (if applicable) , 1 and taxpayer identification number of the employee or former employee purchasing the shares – The initial offering date under the ESPP for the shares, the fair market value per share on the initial offering date, the purchase price paid per share, the purchase date, the fair market value per share on the purchase date, the date the legal title to the shares was acquired by the employee or former employee, and the number of shares purchased These requirements apply only to the first transfer of such shares (including if directly into a brokerage account at a broker or other financial institution) . The corporation is required to identify the shares purchased under an ESPP in a manner sufficient to enable the accurate reporting of the transfer of record title of such shares. How are the information statements delivered to employees and former employees? Copy B of the form is provided as the information statement and may be sent electronically or by mail to the employee’s or former employee’s last known address, or it may be delivered in person. Forms may be delivered electronically only with the person’s consent and in accordance with other specified procedures. What is the deadline? The deadline for furnishing Copy B of Forms 3921 and 3922 to the employee or former employee for ISO exercises or ESPP shares purchased during 2022 is January 31, 20

FAQs

Which IRS forms are required for reporting 2022 ISO and ESPP transactions?

ISOs are reported using Form 3921, and ESPP share purchases are reported using Form 3922. Each exercise or purchase during the calendar year requires its own set of forms and copies.

What information must be included on Form 3921 and Form 3922?

Form 3921 requires corporation and employee identifiers plus ISO grant date, exercise price, exercise date, fair market value per share at exercise, and shares acquired. Form 3922 similarly includes corporation identifiers, employee identifiers (including account number if applicable), ESPP offering details, fair market values at key dates, purchase price, and number of shares purchased.

What are the key deadlines and how are penalties applied for noncompliance?

Copy B to employees or former employees is due January 31, 2023, and Copy A filing with the IRS is due March 31, 2023 for 250+ electronic filers, or February 28, 2023 for manual filing of fewer copies. Penalties range from US$50 to US$290 per late or incorrect statement (with potential increases by delay), and intentional failures carry a minimum US$580 per statement, with aggregate caps and potential doubling if both Copy B and IRS returns are not provided.

Sep 19, 2026

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