Prepare employee stock compensation records for your return

An employer stock award can produce a trail of documents over several years. Keep the grant, exercise, purchase and sale records together by plan so a preparer can follow what happened. The IRS stock option guidance explains that income may arise at different stages depending on the option and transaction.

This guide covers the records behind employee options, qualifying employee stock purchase plans, restricted stock and restricted stock units when preparing a personal return. It does not recommend an exercise, election or sale, or calculate tax or alternative minimum tax. The award agreement and the actual events determine which questions need review.

Identify the plan and the event

Put the grant or plan documents beside any exercise and purchase confirmations. Note what type of award the documents describe, the dates of each event, how many shares were involved and what you paid. If you cannot identify the plan type, flag that question for your preparer rather than guessing from the company name.

The IRS distinguishes statutory stock options, including those granted under an incentive stock option or employee stock purchase plan, from nonstatutory options. Its guidance links to Publication 525 for details. Tax treatment depends on the actual facts and plan.

Separate restricted stock from restricted stock units

For restricted stock, keep the share-transfer documents, vesting conditions and any election already filed, including its submission record. The IRS's 2025 Publication 525 explains that property received for services can have special income timing when it is nontransferable or subject to a substantial risk of forfeiture. It also describes a conditional choice to include restricted property in income in the transfer year. Bring the actual documents rather than assuming an election was made or that every restriction has the same effect. This guide does not advise making an election.

For restricted stock units, collect the award agreement, vesting schedule and settlement statements showing whether you received shares or cash. Record grant, vesting, settlement and sale as separate dates when they differ. Match payroll amounts to the employer's explanation and keep any share-withholding or sale-to-cover statement. A net share balance alone does not explain the gross award, amounts withheld or what happened to shares sold.

If you later sell shares, keep the brokerage sale documents alongside the award and compensation records. Ask the preparer to reconcile what was treated as employment compensation with the basis used for the sale. Do not treat restricted stock and RSUs as interchangeable or assume that a restricted-property election applies to an RSU grant. Publication 525 discusses qualifying equity grants separately and describes conditions for a different deferral election; its existence does not establish that your award qualifies.

Build a timeline across tax years

A useful timeline has one row for each event: the plan name, date, action, share count, amount paid or received, and document that supports it. Start with the award or grant and continue through any exercise, purchase, transfer and sale. Keep separate rows when transactions occur on different dates, even when they involve the same employer. If a document is missing, leave a question beside the row and identify who may have it.

For example, an employee may exercise an incentive stock option in one year and sell some shares in a later year. The exercise confirmation and Form 3921 help establish facts about the earlier event; the later brokerage statement describes the sale. Bring both years' records to the preparer rather than only the latest statement. The IRS says an ISO exercise may raise an alternative minimum tax question, so ask whether the earlier-year return or supporting calculation is relevant. The dates alone do not settle the treatment.

Keep the forms with their matching records

The IRS says an employee should receive Form 3921 after exercising an incentive stock option. It identifies the form as a source of dates and values used in determining applicable ordinary and capital income. The IRS also notes that exercising an incentive stock option may result in alternative minimum tax.

For a qualifying employee stock purchase plan, the IRS describes Form 3922 in connection with certain transfers. The form's filing requirements have conditions; do not assume every purchase produces the same form. Ask the issuer or preparer about a missing or unclear statement.

Keep earlier-year forms with records for shares sold later. Match forms to confirmations using dates and share quantities, and list unresolved differences. An exercise document and a sale statement describe separate events.

Reconcile payroll and brokerage information

Collect wage statements and relevant payroll records for the years of stock events, plus sale confirmations and any broker tax statements or supplemental cost information. If shares moved between accounts, retain records from both sides so the history can be traced.

The IRS says the timing and amount of income from a nonstatutory option depend in part on whether the option's fair market value can be readily determined. Do not assume the amount reported by a broker alone resolves every payroll or basis question. Ask the preparer to reconcile the relevant documents before signing the return.

Follow the shares to a sale

If you sold only part of an award, identify which shares the broker's confirmation says were sold and retain any selection or transaction records. Where shares were acquired at different times, group the records for each acquisition separately. If the shares passed to a different brokerage, provide both the outgoing and incoming records as well as the sale confirmation. A move between accounts can make the history harder to follow even when a later statement shows a sale.

For an ISO exercise, ask the preparer whether regular-tax and alternative minimum tax records both need to be tracked when the shares are later sold. The IRS 2025 Form 6251 instructions say to keep adequate records for both when figuring the applicable adjustment, and describe circumstances such as a same-year exercise and disposition where no adjustment is required. These are year-specific instructions; use the edition and facts relevant to your transaction rather than assuming an adjustment always applies.

The IRS explains that basis is used to figure gain or loss and that adjustments can affect it. For a statutory option disposition that does not meet the special holding periods, its option guidance says amounts treated as wages are added to stock basis when figuring disposition gain or loss. Ask the preparer how that rule applies to the actual award and sale; do not assume every sale has that treatment. Establishing the correct amount for employee stock may require examining the award and compensation records together. Do not change a broker form or assume its figure includes every relevant adjustment; ask what evidence supports the return calculation. Keep an unresolved discrepancy visible until it is explained.

Make a short question list

For each plan, note the award type if known, dates of exercise and sale, documents received and anything missing. Keep earlier events visible alongside later sales, and flag discrepancies without changing an original statement. Ask the preparer which prior-year returns and plan documents are needed, whether a payroll amount relates to the shares sold, and how the brokerage information should be reconciled with the award records.

If a form has not arrived, ask the employer or plan administrator for the applicable statement and tell the preparer what remains outstanding. A missing form does not prove that no event occurred. Use the personal document checklist for the rest of the household packet, and ask how the preparer wants sensitive statements delivered. Keep your own copies of correspondence and confirmations.