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Form 3921 Exercise of an Incentive Stock Option Under Section 422(b), is for informational purposes only and should be kept with your records. It does not need to be entered into your return unless you still hold the stock at year end (if you do, see the previous information regarding Alternative Minimum Tax (AMT)).
WHAT IS FORM 3921? Form 3921 is an IRS Form that reports the exercise of an employee Incentive Stock Option (ISOs). Note that ISO's can only be issued to startup employees, not contractors.
How to file Form 3921 File copy A with the IRS, either electronically or by mail. Give copy B to the employee who exercised options. Keep copy C for your company's records.
If this amount is not included in Box 1 of Form W-2, add it as "Other Income" on your Form 1040. Report the sale on your 2023 Schedule D, Part I as a short-term sale. The sale is short-term because not more than one year passed between the date you acquired the actual stock and the date you sold it.
When you buy an open-market option, you're not responsible for reporting any information on your tax return. However, when you sell an option?or the stock you acquired by exercising the option?you must report the profit or loss on Schedule D of your Form 1040.