If any of your employees exercised Incentive Stock Options (“ISOs”) during the previous tax year, you will need to file a Form 3921 with the IRS for each exercise. This process can take a few weeks, so we recommend starting it at least one month before the March 31 deadline.
To learn more about Form 3921, please read this article.
If no stakeholders exercised ISOs in the past year, you do not need to furnish or file any Form 3921s.
Before You Start: Getting Your TCC from the IRS
Before you generate your Form 3921s in Pulley, we highly recommend that you request a Transmitter Control Code (“TCC”) for the IRS Filing Information Returns Electronically (“FIRE”) system, which will allow you to file with the IRS electronically.
Filing electronically is simpler and allows you more time to submit your forms. The electronic filing due date is March 31, while the paper filing due date is February 28. Paper copies also need to be printed on special paper, which must be ordered in advance from the IRS, since the IRS processing machines can't scan ordinary paper.
For instructions on how to request your TCC, please read this article.
Generating Form 3921 Copies in Pulley
To Start: Navigate to Comply & Tax > IRS & SEC Forms > Form 3921
Step One: Add Company Info
Add the business address you use to file your taxes. This information is needed to identify your company to the IRS.
Name - Company legal name
Address - Company address for filing tax returns
TCC - You must apply for a TCC to file Form 3921 electronically. Here are instructions on applying for a TCC.
Note: You only need a TCC to file twith the IRS. If you are pending approval on a TCC, you can still generate Form 3921s in Pulley by using "12345" as a placeholder and distribute the copies to employees in advance of the January 31 deadline.
TIN - Company EIN
Step Two: Add Your Contact Info
The point of contact will be the reference for the IRS should they have any questions relating to your Form 3921.
Step Three: Add Stakeholder Information
Pulley automatically generates a table of all the stakeholders who have exercised ISOs in the last calendar year:
If you need to generate Form 3921 for previous tax years, you can change which year is being used at the very top of the page:
Form 3921 requires an address and SSN for each stakeholder. You will see a warning if either of these pieces of information are missing for any of the relevant stakeholders. Both fields can be updated directly on the Form 3921 page by clicking the “Edit” button.
Your company’s fair market value (FMV) at the time of each exercise is needed to populate Form 3921. Pulley uses past 409A valuations you’ve recorded on the platform for this purpose, so if there is no recorded valuation valid at the time of of each exercise, you will receive a warning directing you to record the missing valuation(s) in Pulley.
Step Four: Stakeholder Portal Settings
Pulley will generate three copies of each Form 3921: Copy A, Copy B, and Copy C.
The Copy Bs are required to be distributed to employees by January 31. You can use Pulley to directly distribute Copy Bs to employees that have signed up for Pulley accounts by toggling on the “Display a download button on the stakeholder portal" option. Alternatively, you can choose to download and manually distribute these copies to employees.
Step Five: Generating the Documents
Pulley will generate three files after you have completed all the required steps:
Copy A - .txt file, specially formatted to be uploaded to the IRS FIRE site
Copy B - PDF copies that you furnish to employees
Copy C - PDF copies to keep for your company records
Pulley will also generate a Copy A test file. This file can be submitted to the IRS FIRE test system to check for any errors in advance of submitting the final Copy A through the live FIRE site. Detailed instructions on the FIRE submission process can be found here.
NOTE: Do not make any changes or edits directly on the electronic Copy A .txt file. It should only be downloaded as is and uploaded to the IRS FIRE page. If you wish to make any updates to the information contained in the Copy A, you should correct the information on the Form 3921 page or in the specified option grant, as appropriate, and then re-generate and download the forms.
If you have any questions on generating the forms in Pulley, email email@example.com for assistance.
Disclaimer: Prolific Labs, Inc. (DBA Pulley) does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.