Tax Forms for Option Grants
Depending on the type of option grant exercised and the details of your grant, there may be certain tax forms that need to be filed.
1. ISO grants - Your company should file Form 3921 on Carta following the calendar year in which you exercised your grant. This form can be shared with your tax consultant for additional steps. There is no tax withholding. When the stock is sold before the required holding period, compensation income will be reported on your W-2 form.
2. NSO grants (non-employees) - There is no taxable event when the option is granted but the compensation income (exercise FMV minus the option price) is reported on your 1099-MISC form.
3. NSO grants (employees) - Your company should calculate your tax withholding and it will be reported on your W-2 form. If you are exercising electronically on Carta (ACH), Carta will withdraw your tax withholding along with the exercise payment for you.
4. Early Exercisable ISO or NSO grants - If you are early exercising electronically on Carta, you may need to file an 83(b). For more information please check the article here.
If you are contemplating an exercise and want to get advice on what the tax implications will be, we highly recommend that you reach out to your tax consultant prior to processing the exercise.
Here is an article from the IRS site, that may help move you in the right direction.