Introduction

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Any time one of your employees (or former employees) exercises their Incentive Stock Options (ISOs), you will have to prepare a Form 3921. Form 3921 is prepared in triplicate - one goes to your employee, the other goes to the IRS, and the company keeps the last one.

You can use the IRS Form 3921 workflow to issue IRS Form 3921 Notices to employees and generate your company's IRS filing, but you will need to separately file the form with the IRS. To learn more about what the Form 3921 is (and why you have to file it) check out our blog post: Are Your Employees Exercising ISOs? Then You Need to Know About Form 3921. You can also find more information about Form 3921 on the IRS website.

This article will walk you step-by-step through preparing your Form 3921. Below, you can select the portion of the workflow you'd like more information about:

• Getting Started & Reviewing Fair Market Value
• Checkpoint
• Filing With The IRS
• Obtain a Transmitter Control Code (TCC)
• FAQs

Getting Started

The workflow will begin by checking to see if any employees have exercised ISOs in the past year (this workflow is only applicable if the answer for your company is yes). Assuming individuals exercised ISOs last year, the first page of the workflow will ask you for detailed information for each employee who exercised the previous year. You will need to input the fair market value (FMV) per share of the stock on the date that the option was exercised by the employee. The Form 3921 also includes the number of shares exercised and the exercise price.

The workflow provides these numbers for reference only. They are not determinative of the appropriate value to include on the Form 3921. If you are not sure of the appropriate FMV to include on the Form 3921, you should consult a tax attorney.

Checkpoint

After you have reviewed all of your listed employees' information, you can move forward to the Checkpoint. Here, the system will generate a Form 3921 for each employee. You can view the PDF to see the copy the employee will receive on this page. Clicking Continue on this screen will send out emails to employees. The platform will notify the employee that the Form 3921 is available in the Tax Documents folder of their My Documents page.

Filing With The IRS

During this subsequent section of the workflow, you can elect to generate an electronic file that you can submit to the IRS to satisfy the company's obligation to file Form 3921s. Companies that have any combination of 10 or more returns to file on any form with the IRS in a calendar year which includes W-2s, 1099A, and 3921s, must file 3921s electronically. If your company is so small that you don't meet this threshold, you can still file your 3921s on paper but you'll have to meet an earlier deadline (February 28th), and you'll need to order the IRS's specific scannable 3921 Forms to use for the paper filing. Considering these burdens, most companies choose to file 3921s electronically with the IRS.

Fidelity Private Shares will help you prepare the documents, but it is your responsibility to ensure the accuracy of the Form 3921s, and to file the documents with the IRS. Fidelity Private Shares does not file your Form 3921s for you. Consult your tax attorney if you have questions about the forms or the information they contain.

Obtain a Transmitter Control Code (TCC)

To file 3921s electronically, you need a transmitter control code (TCC). The TCC is used to log into the IRS's FIRE (Filing Information Returns Electronically) system. If you obtained your TCC prior to September 26, 2001 ("legacy TCC") and had not previously applied with the IRS to claim your legacy TCC (the deadline has passed), then the IRS requires you to apply for a new TCC using an updated application process to access the FIRE system. To obtain a TCC you'll need to access the IR Application for TCC and create an ID.me account if you don't already have one. Once logged into your ID.me account, the IRS indicates that you must select "individual" on the "Select Your Organization" page, and then you can proceed with an "IR Application for TCC (FIRE)" for your company. Obtaining a TCC takes up to 45 days, so complete the TCC application as soon as you can to help ensure you are able to meet the March 31st filing deadline for 3921s. In this part of the workflow, you will be asked to enter your company's TCC. 

File Form 3921s Electronically Using an IRS FIRE Account

In order to file electronically, you must have an IRS FIRE account. You can create an account and submit Form 4419 online once you have received the TCC. If you would like to preview the FIRE application process, you can visit the FIRE test account system.

If you plan to use FIRE to file your forms and do not already have a TCC (Transmitter Control Code), the IRS strongly recommends completing the application for a FIRE account 45 days before the March 31 deadline.

The next step of the workflow will ask you for your name control and address for IRS communications. Your name control should be located at the bottom of page 2 of your EIN receipt. As an alternative, please see the IRS page about how to determine your name control.

The last page of this workflow will present you with an e-file that you will be able to submit to the IRS. This page will include the downloadable link and instructions on how to file. Please do not edit the downloadable document, and note that your tax filing is not complete until you complete the filing in your company's FIRE account. 

As stated on the IRS page, if the file that was uploaded is Good by IRS standards then it will be released from receipt within 10 days. After this 10 day period, you will be able to see it by clicking the Check File Status link located on the sidebar of the main menu in your FIRE account.

The uploaded FIRE filing will be available in your Data Room. The employee copies will be available in the Tax Documents folder on their My Documents page.

FAQs

What are the IRS Form 3921 deadlines?

The deadline to distribute Form 3921s to employees is January 31st. The deadline to submit the Form 3921 electronically to the IRS is March 31st.

What can I do if I'm going to miss the March 31st filing deadline?

If you won't be able to file your 3921s with the IRS by March 31st, you can apply for an automatic 30-day extension through the FIRE System by e-submitting Form 8809 (which does not require a TCC). If you need even more time, you'll have to complete and submit a subsequent Form 8809 to the IRS by mail or electronically through the FIRE system (TCC required).

What if a deadline falls on the weekend?

If any of the deadlines fall on a Saturday, Sunday, or legal holiday, the applicable due date is the next business day.

NOTE: if you are using FIRE (Filing Information Returns Electronically) for the first time, you must apply for a TCC at least 45 days before the March 31st deadline. 

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

Fidelity provides cap table management and other administrative services to private companies and their equity compensation plans.

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