Introduction
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 copy goes to your employee, one copy goes to the IRS, and the company keeps the third copy.
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 is broken into two parts: first are step-by-step instructions on preparing your Form 3921, and second are steps on filing Form 3921 with the IRS. Click the links below to jump to that section of the article:
Generating Form 3921
Let's Get Started
The IRS Form 3921 Workflow is located in the Government Filing section on the Start New Workflow page.
The workflow can only be run if employees have exercised ISOs in the past year; if none of your employees have exercised options during the previous year you will be unable to run this workflow. Click Continue. If not on file, you will be prompted to enter your Federal Employer Identification Number (EIN) before you can continue to the next step.
Define FMV at Exercise
A list of all applicable exercises will display with information included on Form 3921. This step will prompt you to confirm the fair market values (FMV) and add any missing social security numbers or addresses. The FMV should be the value per share at the time of exercise. To make changes or add missing information, click the Edit icon in the Actions column. Otherwise, click Continue.
Checkpoint
The system will generate a Form 3921 for each of the employees. You can download a copy of the PDF that the employee will receive, or you can share the documents with other users or parties if necessary. Clicking Continue on this screen will send out emails to employees notifying them that their Form 3921 is available in the Tax Documents folder of their My Documents page.
Filing with the IRS
File 3921(s) with the IRS
Select how you wish to file with the IRS. 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.
Generate E-File for FIRE
To file 3921s electronically, you need a transmitter control code (TCC). The TCC is used to log into the IRS's Filing Information Returns Electronically (FIRE) system. If you obtained your TCC prior to September 26, 2001 (a 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 or log into an ID.me account. 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.
Submit your TCC
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.
Enter your TCC and click Continue.
Create and Log In to Your FIRE Account
Follow the steps to create and/or log into your FIRE account and click Continue.
Enter IRS Information
Enter the contact person, your IRS Name Control, and address for IRS communications. Your IRS Name Control should be located at the bottom of page two of your EIN receipt. As an alternative, please see the IRS page about how to determine your name control. Once the information has been entered click Continue.
Download and Upload the FIRE File
Click on the FIRE File button to download the text file you will need to upload to the IRS FIRE system. Follow the steps to upload this file:
- Log back in to the IRS Fire website and click on the Send Information Returns link.
- Enter the TCC that was provided to you and your company's EIN and click submit.
- Verify that all data within the text boxes are correct and click accept.
- Under Choose a File Type in the gray sidebar click on the Original File link.
- Enter your PIN in the provided text box and click submit.
- Click the Choose File button near the bottom of the screen and find the location of the file you just downloaded. The file will be named: "3921 FIRE Report for 2023"
- Click upload.
Next Steps
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 sent via email and are available in the Tax Documents folder on their My Documents page. The files can also be downloaded from this screen. Click Continue to finish the workflow.
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.
Screenshots are for illustrative purposes only.
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.
Third parties mentioned and Fidelity Private Shares LLC are not affiliated. Included are links to websites that are unaffiliated with Fidelity. Fidelity has not been involved in the preparation of the content supplied at the unaffiliated site and does not guarantee or assume any responsibility for its content.
Fidelity Private Shares LLC provides cap table management and other administrative services to private companies and their equity compensation plans.
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