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Employment Law, Benefits & Compensation

Client Alert: Jan. 31 Deadline for Employer Reporting and Filing Obligations for ISO Exercises and ESPP Transfers

Section 6039 of the Internal Revenue Code of 1986, as amended (“Section 6039”), requires both private and public corporations to provide written statements to any employee or former employee who either exercised incentive stock options (ISOs) or acquired employee stock purchase plan (ESPP) shares during the calendar year. The corporation must furnish this information to the employee by no later than January 31, 2017, on Form 3921 (for ISO exercises) and Form 3922 (for transfers of title of specified shares purchased under an ESPP).  

In addition, the corporation must file Forms 3921 and 3922, as applicable, with the IRS. The required Forms 3921 and 3922 must be filed with the IRS by no later than February 28, 2017, if filed in paper form, or March 31, 2017, if filed electronically (electronic filing is mandatory for any corporation required to file 250 or more of either Form 3921 or 3922). Keep in mind that a separate Form is required to be provided to the employee and filed with the IRS for each transaction during the calendar year, so, for example, someone who exercised more than one ISO must receive multiple Forms 3921, each of which must also be filed with the IRS. 

The information statement provided to the employee (Copy B of the applicable Form) must be delivered in person or sent to the last known address of the employee. Alternatively, it may be sent electronically if the employee has previously consented and certain procedures specified in the regulations are followed. 

The IRS imposes penalties for noncompliance with these regulations or for Forms that are incomplete or incorrect or are not timely filed or provided to the employee. Penalties are assessed per each required form, and range from $30 to up to $100 per form for failure to file or for an incorrect filing, and $50 for failure to furnish the employee a correct information statement, subject in each case to certain annual maximum caps. The penalties are higher for noncompliance due to intentional disregard of the requirements and in such circumstances there is no cap on maximum aggregate penalties.   

Sample copies of Form 3921 and 3922 and instructions as to use of the Forms are available on the IRS website at the URLS provided, but these are for informational purposes only. Downloaded copies cannot be scanned by the IRS and may not be used for filing with the IRS; a penalty may be imposed for filing forms that cannot be scanned by the IRS. Only an official printed version for the Form 3921 and Form 3922 may be used by paper filers. The official printed forms can be ordered by calling the IRS at 1-800-TAX-FORM or ordering online.  

If you have any questions or would like additional information, please feel free to contact the Hutchison attorney with whom you regularly work, or you may contact either of the following Hutchison attorneys:  

Amalie Tuffin -; 919.829.4293

Frances-Ann (FA) Criffield -; 919.829.4312


This Alert is provided for informational purposes only and is not intended to be, nor should it be construed as, legal advice on any specific matter, nor does it represent any undertaking to keep recipients advised of all relevant legal developments. This Alert does not create or constitute an invitation to create an attorney-client relationship, nor should it be construed as an advertisement or solicitation for legal services. This material may be considered Attorney Advertising in some states. Prior results do not guarantee a similar outcome.

© 2017 Hutchison PLLC

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