Do I Need to Report Form 3922 on My Taxes?

Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan (ESPP), is an informational document provided by your employer. It is not a bill and does not require immediate tax payment. The form details your purchase of company stock through a qualified plan, often at a discount. Its purpose is to provide data you will need for future tax filings when you sell the stock.

Understanding the Information on Form 3922

Form 3922 is a detailed record of your stock purchase. Box 1 shows the “Grant Date,” the date your company offered you the option to purchase stock. Box 3, the “Exercise Date,” is the day you actually bought the shares. These two dates are important for determining your stock’s holding period.

The form also provides financial data for calculating your taxes when you sell the shares. Box 4 lists the fair market value (FMV) per share on the grant date, while Box 5 shows the FMV on the exercise date. Box 6 details the “Exercise Price Paid Per Share,” which is the discounted price you paid.

Tax Reporting Upon Receiving the Form

You do not need to file Form 3922 with your tax return or report it in any way for the year you receive it. Receiving the form does not trigger a taxable event, as income is not recognized when you purchase shares through a qualified ESPP. Your employer sends this informational form to you and the IRS to document the transfer. You should keep it with your tax records for when you sell the stock.

How to Use Form 3922 When Selling Stock

The information on Form 3922 becomes necessary only when you sell the acquired stock. The data is used to calculate your cost basis, which is the original value of an asset for tax purposes, and determine the capital gain or loss. The transaction is reported on Form 8949, Sales and Other Dispositions of Capital Assets.

Details from Form 8949 are summarized on Schedule D, Capital Gains and Losses. The exercise price and fair market values from Form 3922 are needed to correctly complete Form 8949. This ensures you accurately report the transaction and pay the correct amount of tax.

Your broker will issue Form 1099-B, which reports the gross proceeds from the sale. You must use the information from Form 3922 to adjust the cost basis reported on Form 1099-B. The broker may not have all the details to calculate the correct gain, especially the ordinary income component related to the discount.

Qualifying vs Non-Qualifying Dispositions

The tax treatment of your stock sale depends on how long you held the shares, which determines if the sale is a “qualifying” or “non-qualifying” disposition. A qualifying disposition must meet two holding period requirements. The sale must occur at least two years after the grant date (Box 1) and at least one year after the exercise date (Box 3).

If both conditions are met, the tax treatment is more favorable. For a qualifying disposition, the “bargain element”—the discount you received—is treated as ordinary income, but it is limited to the lesser of the actual discount or the gain on the sale. Any additional profit is treated as a long-term capital gain, which is taxed at lower rates.

A non-qualifying disposition occurs if you sell the stock without meeting both holding period tests. The bargain element, calculated as the difference between the fair market value on the exercise date and the price you paid, is reported as ordinary income for the year of the sale. Any additional gain is a short-term or long-term capital gain, depending on if you held the stock for more than one year from the exercise date.