What Do I Do with Form 3921? Where to Enter ISO Exercise in Tax Software

Someone on Reddit exercised ISOs and received Form 3921 showing exercise price per share, FMV per share on exercise date, and number of shares transferred. They use TaxSlayer and could not figure what to do with those numbers or where to enter them. Form 3921 is informational; you do not report it on a separate line of Form 1040. You enter the numbers (exercise price, FMV on exercise date, number of shares) in your software's ISO / stock options / AMT section so the spread (FMV minus exercise price) × shares is included in your Alternative Minimum Tax calculation. Keep Form 3921 for cost basis when you sell the shares.

Bottom line: Use the exercise price, FMV per share on exercise date, and number of shares from Form 3921 to enter the ISO exercise in your tax software so AMT is calculated correctly. The spread (FMV minus exercise price) × number of shares is an AMT preference item (Form 6251). In TaxSlayer, look for a section on stock options, ISO, or Alternative Minimum Tax (AMT) and enter the Form 3921 numbers there; the software will compute the spread and add it to AMT income. Keep Form 3921 and the numbers for future sales (you will need them for cost basis when you sell, depending on qualifying vs. disqualifying disposition). If you cannot find where to enter it, use TaxSlayer support or a tax professional. Margen can help you model AMT and gain on sale.

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Question from Reddit

What do I do with Form 3921? (Exercise of ISO)

My taxes this year are pretty simple - except for the fact that I exercised some ISO at my company. I received form 3921 with the relevant information, but I can't figure out what to do with those numbers. It shows the "exercise price per share," the "FMV per share on exercise date," and the "number of shares transferred."

I'm using TaxSlayer, and I think some of that information should be entered on this page. I've spent a few hours researching this without a clear answer. Can anyone offer advice on which numbers should go where?

Source: Reddit

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Analysis

The user exercised Incentive Stock Options (ISOs) and received Form 3921 from their employer. The form reports exercise price per share, FMV per share on exercise date, and number of shares transferred. They need to know what these numbers mean and where to enter them in TaxSlayer (or similar software). For ISOs, there is no regular income at exercise, but the spread (FMV minus exercise price) × number of shares is an AMT preference item and must be reflected in the Alternative Minimum Tax calculation. The same information is used later for cost basis when the shares are sold.

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Answer

What Form 3921 is for

• Form 3921 is an informational form your employer (or the company's transfer agent) sends you when you exercise ISOs. It reports:
  • Exercise price per share: The price you paid per share when you exercised.
  • FMV per share on exercise date: The fair market value of the stock on the date of exercise.
  • Number of shares transferred: How many shares you acquired.

What to do with the numbers

• You do not report Form 3921 on a separate line of Form 1040. There is no "Form 3921" box. The impact of the ISO exercise shows up in two places:
  1. This year (AMT): The spread, (FMV per share on exercise date minus exercise price per share) × number of shares, is an AMT preference item. It gets included in your Alternative Minimum Tax calculation (Form 6251). So you need to enter the ISO exercise in your software so that AMT is calculated correctly. If you don't, you may understate AMT (or overstate regular tax).
  2. When you sell the shares: You will need the exercise price and FMV on exercise date (and number of shares) to figure your cost basis and gain: exercise price for a qualifying ISO disposition, FMV at exercise for a disqualifying disposition (or for AMT basis). So keep Form 3921 and any worksheets; you'll use them when you sell.

Where to enter in TaxSlayer (and similar software)

• In TaxSlayer (and most consumer software), look for a section on stock options, ISO, incentive stock options, or Alternative Minimum Tax (AMT). The program may ask you to enter:

  • Exercise price (per share or total),
  • FMV per share on exercise date (or total value),
  • Number of shares,
  • Date of exercise (often required for AMT).

• Enter the numbers from Form 3921 into those fields. The software will then:

  • Compute the spread (bargain element) and add it to your AMT income (Form 6251), and
  • Use it in the AMT calculation so you see whether you owe AMT (or more AMT) because of the exercise.

• If you don't see an obvious "ISO" or "stock options" input, look under Adjustments, AMT, Other income, or Miscellaneous; different products label it differently. You can also check TaxSlayer's help or search for "ISO" or "incentive stock options" in the program. The goal is to get the spread (FMV minus exercise price) × shares into the AMT calculation.

Quick math

• Spread (bargain element) = (FMV per share on exercise date minus exercise price per share) × number of shares transferred.
  • Example: FMV $120, exercise price $50, 1,000 shares → ($120 minus $50) × 1,000 = $70,000 (this is the amount that can trigger or increase AMT).

Summary

• Exercise price, FMV on exercise date, and number of shares from Form 3921: use them to enter the ISO exercise in your software so AMT is calculated (look for ISO / stock options / AMT section).
• Keep Form 3921 (and note the numbers) for future sales; you'll need basis (exercise price or FMV at exercise, depending on qualifying vs. disqualifying disposition).
• Margen can help you model AMT from the ISO exercise and gain when you sell, so you're not surprised at tax time.
• If you still can't find where to enter it in TaxSlayer, use TaxSlayer support or a tax professional so your AMT is correct.

Related: TurboTax ISO Disqualifying Disposition, W-2 Cost Basis · ISO Sell-to-Cover: Tax Implications · ISO Exercise, Reducing Tax via Trust · Stock Compensation (RSUs): Taxes If Not Sold

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Applicable Sections

Federal / IRS

• Form 3921: Transfer of Stock Acquired Through an Incentive Stock Option (ISO); informational form reporting exercise price, FMV on exercise date, and number of shares. (IRS Form 3921)
• Form 6251: Alternative Minimum Tax; the spread from an ISO exercise is an AMT preference (IRC § 56(b)(3)) and is included in the AMT calculation.
• Publication 525: Taxable and Nontaxable Income; discusses stock options, including ISOs and AMT. (IRS Publication 525)

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Practical Notes

• Form 3921 = informational; the numbers feed into AMT (this year) and cost basis (when you sell).
• Enter exercise price, FMV on exercise date, and number of shares in your software's ISO / stock options / AMT section so AMT is calculated correctly.
• Spread = (FMV minus exercise price) × number of shares; that's the amount that can increase AMT.
• Keep Form 3921 and the numbers for future sales (basis when you sell).
• TaxSlayer: Search for "ISO," "stock options," or "AMT"; if unsure, use TaxSlayer help or a tax pro.
• Margen can help you model AMT and gain on sale so you're prepared.

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Limitations

This answer does not cover state AMT or state treatment of ISOs, or exact TaxSlayer menu paths (which can change). For where to enter in your specific software and for AMT planning, consult TaxSlayer support or a tax professional. Margen can help you model the ISO exercise and future sale.