Reporting Form 3921 for exercised ISOs when below AMT threshold - FreeTaxUSA support issue

Thank you for the response. If I don't enter the information from Form 3921 now, will this cause problems when I eventually sell the shares? Will the IRS have some record that I exercised these options that doesn't match up with my tax return?

The primary purpose of Form 3921 is to establish your cost basis for future capital gains calculations. When you eventually sell these shares, you'll need the information from the 3921 to accurately report your gains or losses on Schedule D. The IRS does receive a copy of Form 3921 from your employer, so they have this information on file. However, since it doesn't affect your current tax liability when below the AMT threshold, they typically won't flag your return just for this reason. Just make absolutely sure you keep your copy of Form 3921 in a safe place - you'll definitely need it when you sell those shares to properly calculate your capital gains.

How does taxr.ai work? Do you just upload your forms or do you have to input all the information manually? I'm in a similar situation with some RSUs and ESPPs that my company offers.

I'm skeptical about these tax services. How do you know they gave you the right information? Did they just tell you what you wanted to hear (that you could skip reporting it) or did they actually show you where in the tax code it says this is okay?

You upload your tax documents and forms, including the 3921, and their AI analyzes everything. They have tax pros who review the results for accuracy. It's really straightforward and takes just a few minutes. For RSUs and ESPPs, they definitely handle those too. They explained the different tax treatment between ISOs, NSOs, RSUs, and ESPPs which was super helpful since each has different reporting requirements. They didn't just tell me what I wanted to hear - they actually showed me the specific sections of the tax code and IRS guidance about Form 3921 reporting. They explained that while the form establishes my cost basis for future capital gains calculations, it doesn't trigger additional tax if I'm below the AMT threshold. They still recommended keeping meticulous records for when I eventually sell the shares.

Wait, how does Claimyr actually work? They somehow get you through to the IRS faster? I don't understand how that's even possible with how backed up the IRS phone lines are.

Sure you did. This sounds like another paid promotion. There's no way anyone is getting through to the IRS in 20 minutes. I've tried calling about my 2023 refund for months with no success.

It works by using their system to navigate the IRS phone system and hold your place in line. When an agent is about to answer, you get a call connecting you directly. It's not a service that lets you cut in line - they're just handling the painful waiting part for you. I was extremely surprised it worked too. I had been trying for almost three weeks to get through on my own with no success. The longest I'd waited was 2.5 hours before getting disconnected. With Claimyr, I got the call back in 23 minutes that an agent was ready. I was skeptical at first too, but when you've been trying to reach the IRS for weeks with no success, it's worth trying something different.

I sold some ISO shares last year that I had exercised 3 years prior. The broker reported the sale on Form 1099-B but only included the exercise price as my basis, not any AMT adjustments I had previously paid. I had to manually adjust my basis on Schedule D to avoid double taxation. The IRS never questioned it, but I kept meticulous records including my original Form 3921 and the tax return where I reported the AMT adjustment. My understanding is that the IRS systems don't automatically cross-reference your old 3921, so good record-keeping is essential.

Thanks for sharing your experience. That's helpful to know about the 1099-B only showing the exercise price. I'll make sure to keep all my 3921 forms and tax returns so I can properly adjust my basis when I eventually sell. Sounds like the burden is really on us to track everything correctly.

That's a smart idea I hadn't thought about. Would I just put it in as an informational note or is there a specific way you'd recommend documenting it?

Most tax software has a section for notes or additional information you want the IRS to see. I'd simply list "Received Form 3921 for ISO exercise - below AMT threshold" and include the company name, number of shares, exercise date, and FMV. If there's a miscellaneous forms section, you could also add a brief statement there. The key is to acknowledge you received the form while making it clear there's no tax impact for this year. This creates a paper trail showing you weren't trying to hide anything.