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Form 3921 is an IRS form that must be filed by a company when an employee has exercised an incentive stock option (ISO) in the last tax year. Form 3921 informs the IRS which shareholders received ISO compensation. You must file one form per ISO exercise.
When an employee exercises stock options, you'll credit Common Stock for the number of shares x par value, debit Cash for the number of shares x the exercise price, then debit Additional Paid-In Capital for the difference, representing the increase in value of the shares during the service period.
A stock option is exercised when you pay the Exercise Price to receive the company stock. A stock option may be worth exercising if the current stock price (also known as the fair market value or FMV*) is more than the exercise price.
You have taxable income or deductible loss when you sell the stock you bought by exercising the option. You generally treat this amount as a capital gain or loss. However, if you don't meet special holding period requirements, you'll have to treat income from the sale as ordinary income.
The value of RSUs is typically recorded in Box 14 of the W-2, which is labeled "Other." Box 14 doesn't have a standard list of codes, thus allowing employers to enter any description they like. You might see the value of your vested stock followed by "RSU."
When an employee exercises stock options, you'll credit Common Stock for the number of shares x par value, debit Cash for the number of shares x the exercise price, then debit Additional Paid-In Capital for the difference, representing the increase in value of the shares during the service period.
You have taxable income or deductible loss when you sell the stock you bought by exercising the option. You generally treat this amount as a capital gain or loss. However, if you don't meet special holding period requirements, you'll have to treat income from the sale as ordinary income.
Since you'll have to exercise your option through your employer, your employer will usually report the amount of your income on line 1 of your Form W-2 as ordinary wages or salary and the income will be included when you file your tax return.