Form 3922 is the statement your employer sends after the first transfer of shares you bought through an employee stock purchase plan (ESPP) under section 423(c). You don't file it with your return. You keep it, because its dates and prices decide how much of your gain is taxed as wages and how much as capital gain when you sell.
ESPPs let you buy company shares through payroll deductions, often at a discount. The tax on that discount doesn't happen when you buy; it happens when you sell, and Form 3922 is the record that lets you get it right. Everything here comes from the IRS Instructions for Forms 3921 and 3922 (04/2025), Publication 525 and Tax Topic 427.
When you'll get a Form 3922
A corporation files Form 3922 when it records the first transfer of legal title of ESPP shares, but only where the exercise price was less than 100% of the stock's value on the grant date, or wasn't fixed or determinable on that date. If your shares go straight into a brokerage account under an agreement with the broker, that deposit counts as the first transfer.
Only the first transfer is reported. Moving the shares between accounts later or selling them doesn't produce another Form 3922, so the one you get is the record to keep for those shares. Nonresident aliens who didn't need a W-2 between grant and transfer are excepted.
The eight boxes
| Box | What it shows |
|---|---|
| 1 | Date option granted |
| 2 | Date option exercised (the purchase date) |
| 3 | Fair market value per share on the grant date |
| 4 | Fair market value per share on the exercise date |
| 5 | Exercise price paid per share |
| 6 | Number of shares transferred |
| 7 | Date legal title transferred |
| 8 | Exercise price per share as if exercised on the grant date (only when the price wasn't fixed at grant) |
Buying the shares: no tax yet
Topic 427 says that with a statutory option, which includes an ESPP option, you generally don't include anything in income when you receive or exercise it. Your basis is the option price you paid. Publication 525 notes that the timing of the payroll deductions doesn't change that: in its example, Adrian's employer takes $5 a week for 48 weeks, $240 in total, and buys 12 shares at $20, so Adrian's basis is $20 a share and the holding period for all 12 starts the day after the purchase.
Selling: qualifying or not
All the dollar figures below are worked examples from IRS Publication 525 as of October 2026, not your own numbers. You meet the holding period if you sell after the later of 2 years from the grant date (box 1) and 1 year from the transfer to you. Publication 525 uses one example both ways: an option to buy 100 shares at $20 when they're worth $22, exercised 18 months later at $23, then sold at $30.
| Scenario | Wages | Capital gain |
|---|---|---|
| Sold 14 months after exercise (holding period met) | $200: the $22 grant value minus the $20 price, times 100 | $800 |
| Sold 6 months after exercise (holding period not met) | $300: the $23 exercise value minus the $20 price, times 100 | $700 |
When you meet the holding period and the price was set below 100% (but not below 85%) of the grant-date value, the wage part is the lesser of the grant-date discount or your actual gain. If you sell at a loss after meeting the holding period, it's a capital loss and there's no wage income. In a disqualifying sale the wage part is the full spread at purchase, even if the shares fell afterwards.
ESPP shares versus ISO shares
Form 3922 has a sibling, Form 3921, for incentive stock options. They're governed by the same IRS instructions but they don't work the same way:
| ESPP (Form 3922) | ISO (Form 3921) | |
|---|---|---|
| Triggered by | The first transfer of legal title of the shares | Each exercise of the option |
| Who gets a form | Only when the price was below 100% of the grant-date value, or not fixed at grant | Every ISO exercise, for each transfer |
| Tax when you buy | Generally none | Generally none for regular tax, but the AMT can apply |
| Qualifying sale | Part of the gain can still be wages (the grant-date discount) | All capital gain |
| Holding period | 2 years from grant and 1 year from transfer | 2 years from grant and 1 year from transfer |
The practical difference: with an ESPP, even a perfectly timed sale usually carries some wage income if you bought at a discount. Plan for that rather than expecting the whole gain to be taxed at capital gains rates. And if you buy shares at several purchase dates, every lot has its own Form 3922 and its own clock, so one sale can mix qualifying and disqualifying shares. Tell your broker which lots you're selling before you place the order.
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Avoiding the double-tax trap
The wage part should appear in box 1 of your W-2. Your broker's Form 1099-B, though, won't include it in your cost basis for options granted on or after January 1, 2014. Publication 525 puts the job on you: adjust the basis on Form 8949 by adding the amount taxed as wages. Skip it and the same discount is taxed once as wages and again as capital gain.
The verdict
File Form 3922 with your records, not with your return. Before selling, check box 1 and the transfer date to see whether a short wait gets you the better split, and when you do sell, add the wage amount to your basis on Form 8949 so you're not paying twice.
Frequently asked questions
Do I need to file Form 3922 with my tax return?
No. Keep it for your records and use it to work out your basis and income when you sell the shares.
Is buying ESPP shares taxable?
Generally not when you buy. The discount is taxed when you sell, partly as wages and partly as capital gain.
What is the ESPP holding period?
The later of 2 years from the grant date and 1 year from the date the shares were transferred to you.
Why doesn't my 1099-B basis match?
For options granted on or after January 1, 2014, the 1099-B basis doesn't include the amount taxed as wages, so you adjust it on Form 8949.
