Form 3921 is due TOMORROW!
What is Form 3921?
Form 3921 is an IRS tax form that companies must file when their US employees have exercised Incentive Stock Options (ISOs) during the prior tax year. Companies also must send the form to those employees by January 31st of the year following their exercise.
Why it’s Important:
Form 3921 provides employees with information about their exercise of ISOs and the ‘income’, or gain, on the exercise (Fair Market Value (FMV) minus the exercise price per share multiplied by the number of shares exercised, aka the ‘spread’). Employees usually pay $0 in taxes when they exercise ISOs, but the gain on the exercise contributes to the calculation of Alternative Minimum Tax (AMT).
Deadlines for Form 3921:
Form 3921 Copy B must be sent to employees by January 31st of the year following the exercise.
Form 3921 Copy A must be filed with the IRS by February 28th if you file by mail, or March 31st if you file online through the IRS’s FIRE system (keep in mind that you must have a Transmitter Control Code (TCC) in order to file online).
Consequences of Not Filing by Deadlines:
Companies that fail to file Form 3921 by the deadlines may be subject to penalties from the IRS. The penalties can range from $50 - $280 PER FORM NOT FILED (yeah, it’s best to file on time).
Carta’s equity management platform offers a Form 3921 tool for companies on certain subscription tiers. If your company does not have a current TCC, you can still generate the Form B copies for your employees using this tool, as long as you have the required employee information stored in Carta.
Feel free to reach out if you have any questions or need any assistance with filing your Form 3921s.
For more information, check out the IRS’s page on Form 3921.
