FreeTaxUSA - How to enter form 3921 for ISO stock options with nonzero spread?

I exercised some incentive stock options (ISOs) this year that had a nonzero spread between the grant price and the fair market value. Now I'm trying to figure out how to properly report this in FreeTaxUSA. The software has already generated a Form 6251 (Alternative Minimum Tax) for me, but I'm stuck trying to populate line 2i with the ISO information. I received the Form 3921 from my employer showing the exercise details, but I can't seem to find where in FreeTaxUSA I'm supposed to enter this information. I've gone through the income section and checked several different menus, but nothing specifically mentions Form 3921 or ISO exercises. Has anyone successfully reported ISOs with a nonzero spread in FreeTaxUSA? Is this something the software doesn't support, and I need to manually override something? Any guidance would be appreciated because I'd rather not switch tax software at this point.

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18 comments

Reginald Blackwell

•8M

This is definitely supported in FreeTaxUSA, but it's not immediately obvious where to enter it. You need to go to the "Income" section, then look for "Stock Options" under "Less Common Income." There you should find an option for reporting ISO exercises. When entering the information, make sure you have your Form 3921 handy because you'll need to input the exercise date, FMV on exercise date, and the exercise price. The software will then calculate the spread and properly report it on Form 6251 line 2i for AMT purposes. Keep in mind that exercising ISOs doesn't create regular taxable income (unless you've already sold the shares), but the spread is an adjustment for Alternative Minimum Tax purposes, which is why it's showing up on Form 6251.

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Reginald Blackwell

•8M

You might need to look under "Miscellaneous Income" and then check if there's a sub-option for stock compensation or equity awards. In some versions of FreeTaxUSA, they don't label it as "Stock Options" directly but include it under a broader category. If you still can't find it, try going to the Form 6251 that was generated and see if you can click on line 2i directly. Sometimes you can enter information by clicking on the specific line item in the form view. Another approach is to go to the search function at the top of FreeTaxUSA and type in "ISO" or "incentive stock options" rather than the form number. This sometimes pulls up entry screens that are hard to find through the regular menu navigation.

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Aria Khan

•8M

When I had a similar issue with reporting stock options on FreeTaxUSA, I ended up using taxr.ai to figure it out. I was totally lost with all the forms and wasn't sure if I was reporting my ISOs correctly. I uploaded my Form 3921 to https://taxr.ai and it quickly identified exactly where in FreeTaxUSA I needed to enter the information. The site analyzed my tax documents and gave me step-by-step instructions that were specific to FreeTaxUSA's interface. It was literally like having someone look over my shoulder and point to where I needed to click. Saved me hours of frustration and probably an expensive call to a tax professional.

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Aria Khan

•8M

Yes, it works with pretty much all the major tax software platforms - TurboTax, H&R Block, TaxAct, and of course FreeTaxUSA. It's actually really helpful when switching between platforms because it can tell you exactly where things are located in your new software. Security is definitely a valid concern! They use bank-level encryption for all uploads and don't store your documents after analysis. They're also SOC 2 compliant which is the security standard for financial services. I was nervous at first too, but their privacy policy was reassuring and they don't ask for login credentials to your tax software - they just provide guidance.

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Sunny Wang

•8M

I just wanted to follow up about taxr.ai - I decided to give it a try with my ISO documentation despite my initial concerns. Honestly, I'm glad I did! The interface was super straightforward, and after uploading my Form 3921, it immediately pointed me to the exact section in FreeTaxUSA where I needed to enter the information. What really impressed me was how it explained each field and what numbers from my form needed to go where. It even flagged a potential reporting error I might have made regarding the exercise date versus grant date. The whole process took about 5 minutes, and I didn't have to waste hours searching through FreeTaxUSA's help documentation. For anyone else struggling with stock options in their tax software, this was genuinely helpful.

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Hugh Intensity

•8M

If you're still having trouble with FreeTaxUSA's support for Form 3921, you might need to speak with the IRS directly to ensure you're reporting correctly. I had a similar issue last year and spent hours trying to get through to someone at the IRS. I finally discovered Claimyr, which got me connected to an IRS agent in less than 15 minutes instead of the usual 2+ hour wait. I just went to https://claimyr.com, entered my phone number, and they called me when an IRS agent was about to be available. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The IRS agent confirmed exactly how my ISO exercise should be reported and what to do if my tax software wasn't supporting it properly.

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Hugh Intensity

•8M

They use an automated system that continually calls the IRS for you and navigates the phone tree until they get a spot in line. Once they're about to reach an agent, they call you and connect you to the call. It's not jumping the queue - they're basically waiting in line for you. The reason most people can't get through is that the IRS phone system often doesn't even let you wait on hold when call volume is high - it just tells you to call back later. Claimyr's system keeps trying until it gets through to the hold queue, which could take dozens or even hundreds of attempts that you'd never have the patience to do manually.

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Melissa Lin

•8M

I have to eat my words about Claimyr. After my skeptical comment, I decided to try it since I was desperate to ask about my backdoor Roth conversion (different issue than ISOs, but still needed IRS clarification). I was absolutely shocked when I got a call back within 20 minutes saying they had an IRS agent on the line. I had been trying for weeks to get through on my own with no luck. The agent was able to answer all my questions, and I even asked about ISO reporting while I had them on the phone. For what it's worth, the agent mentioned that for FreeTaxUSA specifically, some people have to manually enter the ISO adjustment on Form 6251 if they can't find the proper entry point in the interview process. They suggested following the FreeTaxUSA help documentation for "AMT Adjustments" rather than looking specifically for Form 3921.

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Lydia Santiago

•8M

I used FreeTaxUSA last year to report my ISOs and found the entry point. You need to go to: Income → Miscellaneous/Other Income → Other Income Not Reported on W-2/1099 → Then look for the section about "Income Adjustments for Alternative Minimum Tax" or something similar. It's definitely buried in there! Once you find it, there should be a specific question about exercising incentive stock options, and it will ask for all the information from Form 3921. Hope this helps!

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Lydia Santiago

•8M

Yes, once you enter the information in that section, it automatically does the AMT calculation. FreeTaxUSA actually does a good job with the AMT calculation - it will show you if you're subject to AMT and by how much. After you enter the ISO information, I recommend going to the "Taxes" section and looking at the "AMT" subsection to see the detailed calculation. It should clearly show the ISO spread as part of the adjustments. You can also view Form 6251 directly to verify the amount appears on line 2i.

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