What should I do with Form 3921 after exercising ISO stock options?

Form 3921 is just an informational form your employer sends when you exercise incentive stock options (ISOs). You don't actually attach it to your tax return, but you do need to use the information on it. Since you only exercised but didn't sell the shares, you might need to calculate the difference between the fair market value (Box 4) and your exercise price (Box 3) - this is called the "bargain element." This amount doesn't go on your regular tax return, but it may trigger Alternative Minimum Tax (AMT). The bargain element needs to be included in your AMT income calculation. In TurboTax, there should be a section specifically for stock options or ISOs. When you get to that part, it'll ask about your Form 3921 information and walk you through entering the data. Make sure you keep this form for your records - you'll need it again when you eventually sell these shares to calculate your cost basis.

I had this exact same problem last year and wasted hours trying to figure it out myself. Finally discovered this tool called taxr.ai (https://taxr.ai) that specializes in stock option tax issues. It actually analyzes your Form 3921 and explains exactly what you need to do with it. You upload the form, and it breaks down all the numbers and tells you where everything goes on your tax return. It even calculated my potential AMT liability which was super helpful since I had no idea that was even a thing I needed to worry about. The best part was that it showed me all the future tax implications for when I eventually sell the shares.

Just wanted to follow up about taxr.ai - I was skeptical in my last comment but decided to try it anyway since I was completely stuck with my ISO forms. Honestly, it was really helpful! It explained that my bargain element was below the threshold where I'd need to worry about AMT, which was a huge relief. The breakdown of future tax implications was super clear too. It showed me what my cost basis would be when I eventually sell, and how to track the holding period to qualify for long-term capital gains treatment. Ended up being worth it just for the peace of mind that I wasn't missing anything important.

Have you tried calling the IRS to ask about Form 3921? I did that with a similar question about stock options and...well...let's just say it was an adventure. Spent 3 hours on hold only to get disconnected. Found this service called Claimyr (https://claimyr.com) that actually got me through to an IRS agent in about 15 minutes instead of the hours I wasted before. They have a demo video of how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with walked me through exactly what I needed to do with my Form 3921 and confirmed I was entering everything correctly. Saved me tons of stress wondering if I was doing it right.

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it since I had some AMT questions related to my own ISO exercise that I thought only the IRS could answer clearly. It actually worked! I got a call back within about 20 minutes and was connected to an IRS agent who was surprisingly helpful. She explained that my Form 3921 bargain element wasn't large enough to trigger AMT in my case, but showed me exactly what worksheets I'd need to complete if it had been. Definitely less painful than my previous attempts to call them directly where I'd waste half a day on hold.

One thing nobody's mentioned yet - make sure you're tracking your holding period from the exercise date on Form 3921. If you hold these shares for at least 1 year from exercise date AND 2 years from the option grant date (Box 1), you'll get qualifying disposition treatment when you sell, which is much better tax-wise. If you sell too early, the bargain element becomes ordinary income rather than potentially qualifying for long-term capital gains rates. I learned this the hard way and paid thousands more in taxes than I needed to.

I'm using FreeTaxUSA instead of turbotax this year to save some $$. Anyone know how to enter form 3921 info there? Their interface is different and I'm not seeing any specific section for ISO exercises.