Ensure your cap table is compliant and ready to file to the IRS or send to your tax preparer
Note: Be careful to keep social security numbers and tax identification secure. Do not distribute copies of data generated by LTSE Equity to any unvetted party.
To access the feature, Boost customers can navigate to Compliance & 409A -> Form 3921 Readiness.
Form 3921 is a form that companies must file with the IRS when any US-based employee exercises an incentive stock option (ISO). This form must be filed for the calendar year in which the ISO is exercised by specific deadlines. A copy of the form must also be distributed to each applicable shareholder. Read more about Form 3921 at the IRS website.
For any given tax year, LTSE Equity will help ensure your cap table is compliant and ready to file to the IRS or send to your tax preparer. LTSE Equity helps you validate all stakeholder details, grants, exercises and fair market valuation history to ensure that all copies of Form 3921 can be properly and accurately completed. If any issues are discovered, LTSE Equity will help you resolve them.
Once validated, Form 3921 Readiness will generate a list of all qualifying ISO exercises that were executed in the system with compiled form values ready for you to pass to your tax preparer or to an online service to file and/or distribute.
Note: LTSE Equity does not generate the final tax forms to submit to stakeholders or to the IRS. If you want to E-File automatically, simply upload the output from LTSE Equity to a tool like Tax1099 to automatically send copies to employees and E-File with the IRS.
Form 3921 IRS Deadlines
There are specific deadlines for the various form submissions to the IRS and to employees:
January 31 - Deadline to furnish a Copy B to all employees. There is a penalty from the IRS if this deadline is missed.Form 3921 Readiness Validation
There are 3 main issues that can prevent you from generating output from our Form 3921 Readiness tool.
- Missing company details required for Form 3921
- Missing fair market value (from 409A valuations) for ISO exercises
- Missing stakeholder details required for Form 3921
Our Form 3921 Readiness will guide you through resolving these issues so you can generate a Form 3921 data report.
Selecting a Tax Year
Form 3921 is required when there are ISO exercises for a given tax year, start by selecting a tax year that you will be filing Form 3921 for. If a given tax year is not selectable, it means there are no recorded ISO exercises for that year recorded within LTSE Equity.
Company Details
In order to file Form 3921, the following company details must be added to LTSE Equity:
- Company name
- Company address, including city, state, zip/postal code
- Valid IRS Tax ID
If required information is missing or invalid, you will see a message indicating so. You can click Edit company to add/edit the company details to correct the issues.
If all details are correctly entered, you will see the following confirmation.
Fair Market Value (FMV) History
Form 3921 requires fair market value to be included for every given exercise. When ISO exercises are compiled for the selected tax year, LTSE Equity will automatically check to see if there are corresponding Fair Market Values added from past valuations.
If ISO exercises occur at a time when there is no corresponding fair market value entered into LTSE Equity, you will need to first add a valuation to your company’s valuation history that matches the time the exercise occurred. You will see a message informing you that there are missing valuations. Simply click Update to add 409A valuations to your records.
If all exercises for the given tax year have a corresponding FMV valuation then you will see a confirmation.
Note: In some rare cases, an exercise may have occurred during a time of valuation. In this case it could be possible that a new valuation will change the fair market value that needs to be reported for a given exercise. In this case, we strongly recommend that you talk to your legal counsel and tax professional to understand the implications this may have on your Form 3921 filing.
Stakeholder details
All stakeholders that exercised ISO grants for the selected tax year, must have certain details entered into LTSE Equity.
- First Name
- Last Name
- Street Address, City, State, Country, Zip/Postal Code
- Tax ID (SSN)
- Tax residency status (optional)
If there is any missing information on a stakeholder click Edit profile to add/edit stakeholder details. If you want to update residency information, you can click Edit history.
Note: Because ISO grants should only be exercised by US residents, it is assumed that any ISO exercise was compliant in this regard. You should confirm with your tax preparer or your legal counsel to confirm whether non-resident stakeholders should be included/excluded in your final paperwork.
Preview of included ISO Exercises
Form 3921 Readiness will generate a preview of all the exercises that will be included in the export.
Confirmation and Export
After reviewing the ISO exercises, you can click on the checkbox to confirm and start the Export for Form 3921.
Generated exports can be found on the Exports tab, and you can download the report for the given tax year once it has been generated. Use this export spreadsheet to populate Form 3921 copies for each exercise. The file is compatible with other E-file providers.
A Note on Excluded exercises
In some rare cases, there may be missing stock option grants or stock grants attributed to ISO exercises for the given tax year. If this section appears during validation, it will outline the missing grants and highlight a course of action to repair.
In most cases you will need to contact our support team who can provide assistance in resolving these issues.
