What is Form 3921?


If employees exercised incentive stock options (ISOs) last tax year, your company needs to file IRS Form 3921. Companies must file one form per employee, and if they miss the deadline or ignore IRS reminders and fail to file, they could end up paying expensive fines.

Each 3921 has three copies. Your company:

  • Files copy A with the IRS, either electronically or by mail
  • Gives copy B to theemployee who exercised
  • Keeps copy C for your records

How to file Form 3921

You can file form 3921 either by mail or online. If you are required to file 250 or more 3921s, you must file online. Either way, you’ll need a few things to get started:

  • A list of which employees exercised ISOs in the previous year
  • Those employees’ tax ID numbers
  • Your company’s transmitter control code (TCC)
  • If you’re filing online, you’ll also need an account on the IRS’ Filing Information Returns Electronically (FIRE) system

If it’s your first time filing online, you’ll need to mail in Form 4419 so the IRS can assign you a TCC, which will allow you to set up a FIRE account. This may take a few weeks.

If you choose to file by mail, you can’t just print out the forms yourself and send them in. The IRS requires you print them on special paper. The IRS uses machines to process the forms and the machines can only read IRS-supplied paper. You can order the special paper on the IRS’ website.

If you use Carta for preparing Form 3921, filing is easy.

Form 3921 deadlines

The deadlines to file are as follows:

  • January 31st: deadline to provide copy B to all employees who exercised ISOs in the previous year
  • February 28th: deadline to file copy A with the IRS on paper
  • March 31st: deadline to file copy A with the IRS electronically

If an IRS filing deadline falls on a legal holiday or weekend, the deadline is automatically extended to the following business day.

Failure to file Form 3921

If you don’t file the correct information by the due date, you’ll likely pay a penalty. How much you pay depends on when you file the correct form. If you correctly file:

  • Within 30 days after the due date you’ll pay $50 per form (i.e. per employee who exercised an ISO)
    • The maximum penalty is $547,000 per year or $191,000 for small businesses (i.e., any business with an average of $5M or less taxable income for the last three years)
  • More than 30 days after the due date, but by August 1st, you’ll pay $100 per form
    • The maximum penalty is $1,641,000 per year or $547,000 for small businesses
  • After August 1st, or if you never correctly file, you’ll pay $270 per form
    • The maximum penalty is $3,282,500 per year or $1,094,000 for small businesses

Penalties only apply if you don’t file or if there are material errors on the submitted forms. For example if the payee’s tax ID number or surname is incorrect and prevents the IRS from processing the return, you would get fined.

Carta generates Form 3921 in one click

Carta’s platform allows you to generate all your 3921s in seconds.

When your cap table is on Carta, the platform automatically tracks when employees exercise ISOs. When tax season comes around, Carta’s system simply generates three copies of each form. You can even deliver copy B to employees with one click and store copy C on Carta for your records.

To file online with the IRS, everything you need is in one place. Just download 3921 copy A and find your TCC code in your Carta settings. From there it’s a matter of following the instructions on the IRS site.

Tax season is stressful, but Form 3921 doesn’t have to be. To learn more about using Carta for 3921, reach out to expansion@carta.com.

DISCLOSURE: This communication is being sent on behalf of eShares, Inc. dba Carta, Inc. (“Carta”). This communication is not to be construed as legal, financial or tax advice and is for informational purposes only. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.


Related articles


What’s Rule 701 and what’s recently changed?

Learn more about Rule 701, recent updates, and how to stay compliant at your company. Everything from the history of Rule 701 to the most recent changes.

What is ASC 718?

ASC 718 is the standard way companies expense employee stock-based compensation on an income statement. Equity awards are part of compensation and have a specific set of accounting rules, stated in ASC 718, that companies should follow.

What is a 409A valuation?

Learn everything you need to know about section 409A of the internal revenue code. From what is a 409A valuation to 409A methodologies and process.

eShares, Inc. DBA Carta, Inc. is a transfer agent registered with the U.S. Securities and Exchange Commission. The services and information described in this communication are provided to you “as is” and “as available” without warranties of any kind, expressed, implied or otherwise, including but not limited to all warranties of merchantability, fitness for a particular purpose, or non-infringement. Neither eShares, Inc. DBA Carta, Inc. nor any of its affiliates will be liable for any damages, including without limitation direct, indirect, special, punitive or consequential damages, caused in any way or arising from the use of the services or reliance upon the information provided in this communication or in connection with any failure of performance, error, omission, interruption, defect, delay in operation or transmission, computer virus or line or system failure. Transfer Agent services for DTC-eligible registered companies provided by Philadelphia Stock Transfer, a Carta affiliate. Carta Securities LLC is a broker-dealer and a member of FINRA and SIPC. Contact: eShares, Inc. DBA Carta, Inc., 195 Page Mill Road, Suite 101, Palo Alto, CA 94306.

© 2018 ESHARES, INC. DBA CARTA, INC.