Introducing Session Types for Tax Advisory


What's new

Employees who have access to Carta Tax Advisory through their employer may now choose from up to four different tax advisory session types. This aims to provide transparency and flexibility so you can have the conversation that's right for you. 

Who this affects

US-based employees subscribed to Carta Tax Advisory through their employer

How it works

Scheduling a session

Log in to your  Carta employee account, navigate to the Tax advice tab.

From there, click on "Book a free session" to browse different session types. 

Once you're on the session type selection page, you'll see a brief outline on how to schedule and a selection of three to four different session types. 

Select the session type that's right for you and click "Schedule free session" to book a time with a tax advisor. 

If you're not quite sure where to start, we recommend starting with the "Understand equity basics" session type to learn about your equity and taxes at a high level.

Note: The "Discuss tender offer participation" session type only appears if your company is currently undergoing a tender offer. 

Preparing for a session

Session types: Discuss tender offer participation | Create tax scenarios

Once you've scheduled a time to speak with a tax advisor, you'll be prompted to upload a few documents. Tax advisors will create personalized tax scenarios using this information so you can have the most accurate tax picture. 

If you don't have these documents on hand now, you can skip this step for later. However, you must upload documents at least 24 hours before your session so advisors have enough time to prepare. 

After uploading your documents, you're ready for your session. 

You'll receive a calendar invite with a zoom link to attend your session at your scheduled time. You can also see this information in your tax advice tab in Carta, with the option to reschedule or cancel using the "View details" button. 

Session types: Ask a quick question | Understand equity basics

Once you've scheduled a time to speak with a tax advisor, there's nothing else you need to prepare ahead of your session.

You'll receive a calendar invite with a zoom link to attend your session at your scheduled time. You can also see this information in your tax advice tab in Carta, with the option to reschedule or cancel using the "View details" button. 



New Hire Onboarding for Tax Advisory

What's new

New hire onboarding allows new hires to access their Carta account before they receive and accept their equity grant. By creating a stakeholder record for the employee, employees receive an email to register for a Carta account. This grants them access to Carta Tax Advisory.

If you do not add new hires they will need to wait to accept their equity grant in order to access Carta resources, which can take several months to approve and issue. 

New employees often have questions about their equity as soon as they join a company, Carta Tax Advisory gives them access to dedicated 1:1 support from equity tax experts from day 1 to help them understand their equity packages. 

Who does this affect?

Companies subscribed to Carta Tax Advisory

US-based employees (new hires) at companies subscribed to Carta Tax Advisory

How can I give new hires access to their Carta account?

Important notes before starting: 

  1. The new hire onboarding process only applies to companies subscribed to Carta Tax Advisory
  2. Tax advisory sessions are only available to US citizens or residents
  3. Adding an employee into Carta as a stakeholder provides them access to Carta services like Carta Tax Advisory. Ensure you only add employees you intend to issue equity to.

The Stakeholder ledger allows users with Company editor or Legal administrator permissions to view and modify information for a person that holds multiple securities across the company 

Navigate to Stakeholders > All Stakeholders


Under the Manage Stakeholders drop-down, admins can add stakeholders individually or in bulk

Individually add stakeholders

Select “Add stakeholder” in the Manage stakeholders dropdown list



A modal will appear requesting information about the stakeholder

Required fields:

  • First name
  • Last name
  • Relationship (i.e. employee)
  • Relationship effective date
  • Add and save an address 

Tax ID, Employee ID, Payroll ID, and other address fields can be input as available, but are not required before equity grant issuance

Bulk add stakeholders

Select Bulk add stakeholders from the Manage stakeholders dropdown


Download the template spreadsheet to import stakeholders’ information, save, and upload the modified file. Carta will run a check on the data entered before saving the changes


Note: Admins should not add new columns or move columns in this sheet. They must use the template as is


Required columns: 

  • First name
  • Last name
  • Relationship (i.e. employee)
  • Relationship effective date (MM/DD/YYYY)
  • Country (3 digit) 
  • State (2 digit)

After the updated xslx sheet is uploaded, click “Submit changes” and a confirmation modal will appear

Confirm to complete stakeholder creation


Revenue Procedure 2002-50 (Company Tax and Compliance)

What's new?

Carta has made it easier for private companies running a tender offer to invoke IRS Revenue Procedure 2002-50, which is applicable to certain transactions involving the exercise of options and sale of the resulting securities during a transaction on the same day. This procedure allows for the exclusion of those same day option sales from Form 1099-B reporting if certain conditions are met. For example, this may apply to cashless exercised options in connection with a secondary transaction on Carta where there is no capital gain (Sale Price = Fair Market Value).

How does it work?

To make a Revenue Procedure 2002-50 election on an applicable transaction, company administrators may request an Officer Certificate template from Carta to complete and get signed by a Company Officer who has the authority to make decisions on the tax treatment of cashless exercises in a tender offer.

Fig 1: Sample of an Officer Certificate

The completed form can then be returned to Carta, who will then trigger the Revenue Procedure. 

Any employee whose transactions on Carta were excluded from 1099-B reporting as a result of Revenue Procedure 2002-50 will, if applicable, receive a supplemental Disclosure Statement detailing the fees and gross proceeds on cashless exercises of options so they can complete their Form 8949 reporting. Compensatory income from cashless exercises is reported as ordinary income on the W-2.  

This statement will be delivered electronically by February 15th of the following year in the same manner as all other tax documents on Carta. No such statement will be generated if the employee was not charged any fees by Carta.

Fig 2: Sample of IRS Revenue Procedure 2002-50 Disclosure Statement

The company administrator can also generate a new report of all the Disclosure Statements issued after the transaction. The Revenue Procedure Disclosure Statements Report will assist in auditing transactions ahead of the tax season to ensure completeness and accuracy for tax filing purposes. The report can be found under your Reports section in Carta.   

Fig 3: Sample of Disclosure Statements Report

Make tax reporting easier for same-day option exercises and sales during a tender offer by invoking Revenue Procedure 2002-50

The Revenue Procedure feature will:

  • Remove an employee’s burden to reconcile their Form 1099-B and Form W-2 when determining their Taxable Income after a same day option exercise and sale
  • Reduce the risk of paying capital gains tax on proceeds that were already taxed as ordinary income

Reach out to Carta to get the process started

Is your company running a tender offer? If so, the Revenue Procedure 2002-50 will be enabled on the platform after returning a completed and signed Officer Certificate to Carta. Companies who ran a tender offer previously in 2022 can retroactively upload the appropriate Officer Certificate to benefit from this feature until the end of 2022. Please contact your CSM or Liquidity representative for more information.


Updated Form 3921 Dashboard with Consolidated 3921 Statements (Company Tax & Compliance)

What's new?

After reviewing customer feedback, Carta made several user experience enhancements in the Form 3921 dashboard.

Carta now aggregates individual Form 3921’s for ISO exercises into consolidated statements for ease of use. Individual Copy B’s are still available to download if required. These statements will be available in participant portfolios when companies generate their 3921’s. 

The enhanced user experience also allows company stock administrators to download the Manage Stakeholder Details report to review all stakeholder records at once instead of in a paginated view within the Administrator Experience. Companies with 50+ stakeholders now have enhanced filter and sorting capabilities (e.g, select one or multiple years to download the Stakeholder details ledger) to better analyze historical data.

There is a new tab for “Exclude Transactions” for further flexibility if company administrators need to suppress reporting on individual option exercises. 

How does it work?

The new Form 3921 Dashboard is available now to all companies subscribed to this feature.

Reach out to Carta to get the process started

Reach out to your CSM to enable Form 3921 reporting if you are interested in upgrading your subscription. Public Market companies will have this enabled by default.


 

Mass Issuance Report

What's new?

Upon going public, issuers must communicate the share positions held on their former cap table to their new public Transfer Agent. Carta’s Mass Issuance report captures key information that Transfer Agents in order to validate and reflect public share ownership following an IPO. 

The Mass Issuance report aggregates pertinent cap table and tax-related (e.g, cost basis) information, typically found in multiple reports, into one export file containing information required by the Transfer Agent. Now issuers can easily export ownership information for communication to their Transfer Agent in one step.  

The Mass Issuance report includes additional information on the Issuer's stock program shares to make it easier for the Issuer to move the eligible portion of its stock ledger back to an equity management provider - such as Carta - from the Transfer Agent. This helps preserve critical tax information while facilitating the delivery of public shares to the stakeholder's Carta portfolio for trading.

How does it work?

Experience a secure and smooth data transition as you move your private equity records to a public Transfer Agent. 

The Mass Issuance report:

  • allows for the easy communication of ownership data to a public Transfer Agent in one file ahead of an IPO, SPAC or direct listing; and
  • includes additional fields needed for when you permission your Transfer Agent to send your public stock ledger to a public equity management provider of choice - such as Carta.

Reach out to Carta to get the process started

Are you preparing to go public? Reach out to Carta’s public markets team (carta.public@carta.com) to begin planning your IPO journey.

The Mass Issuance report can be found under your Reports section in Carta.   

Early Lockup Release Feature (Public Markets)

What's new?

Customers wishing to allow their shareholders to sell a portion of their holdings prior to a traditional 180-day lockup expiration can now control early lockup release programs through Carta. With Carta’s early lockup release functionality, your company can specify the quantity of shares each shareholder can sell during a specified period. 

Carta’s Public Market Equity Management Services team will work with companies to determine: 

  1. shareholder eligibility for the early lock-up release period
  2. the start and end date of the liquidity period
  3. how many shares each individual may sell during the period

After gathering this information, Carta will then work with the customer to complete an import template, which will be uploaded to Carta's public platform. Eligible shareholders will now be able to see the quantity of shares they can trade, what they’ve already traded, and what portion of shares is still remaining. 

Allow your employees to begin trading company shares Day 1 post-IPO

The early lockup release feature:

  • allows your employees to sell prior to the standard 180-day lockup period while enforcing the terms of your company’s early lockup release program; and
  • makes it easy to instruct participation eligibility and quantity limits for all shareholders.

Figure 1: Shareholders can monitor the number of shares they can sell during the early lockup release.

Figure 2: Shareholders are limited to the quantity of shares that they are allowed to sell per the rules of the early lockup release. Quantities can be set specific to an individual.

Trade limits apply across asset types. The sale of long stock, in addition to cashless option transactions, will count against the shareholder’s total allowed quantity to trade, ensuring that the stakeholder won’t oversell per the terms of the early lockup release.

Reach out to Carta to get the process started

Reach out to Carta’s Public Markets team (carta.public@carta.com) to begin customizing an early lockup release benefit for your employees ahead of an exit.

Improved Capitalization > by Share Class Experience

Soon, companies will have access to the updated Capitalization > By Share Class view. This page comes with improved performance for large Cap Tables, allowing you to view and interact with your Cap Table up to 5x faster.

To access this view, you can navigate to Capitalization > By Share Class.

What’s next?

We will continue to improve the experience, adding a new summary visualization to the top of the page, and improving the navigability between the By Share Class and the By Stakeholder Cap Tables.

Resources

Support Article: Capitalization Table - By Share Class

New Updated User Roles

Soon, Carta customers will start seeing an expanded set of Roles to help you reflect the different individuals who are handling different aspects of Cap Table management.

For now, users assigned to new roles will serve as point of contact for their areas. Over time, these individuals will see updated experiences and be guided to relevant Carta tools.

To see this experience, Navigate to "Company > Permissions and Roles > Roles"

Carta Web now has Section 6039: Form 3922 tax form generation

What's new? 

Carta Web now supports the generation of Form 3922 for Employee Stock Purchase Plans in the Company Administrator view. Companies that would normally have access to the Compliance tab, can now request access to Section 6039 from their Customer Success Managers. Form 3922 forms are due to stakeholder portfolios by January 31, 2022. By enabling this functionality in Carta Web, administrators are now in control of the Form 3922 generation and distribution, similar to Form 3921 for Incentive Stock Option Exercises.

NOTE: This feature can be enabled upon request from companies that have an Employee Stock Purchase Plan.

From the IRS:

Corporations file this form (3922) for each transfer of the legal title of a share of stock acquired by the employee pursuant to the employee's exercise of an option granted under an employee stock purchase plan and described in section 423(c) (where the exercise price is less than 100% of the value of the stock on the date of grant, or is not fixed or determinable on the date of grant).

How to Use

  1. To generate Form 3922, navigate to Compliance > Section 6039.
    NOTE: TCC is not required to generate Form 3922 Copy B for employees.
     
  2. Click Generate.
     
  3. Select the Effective Year of the report.
     
  4. Review any missing information, check off the box to confirm company data, then click Next: add contact info. If any information is missing, complete the information, then return to this stage.
     
  • If Company tax data is not complete:

    1. Navigate to Company > Settings.
    2. Click into the Profile tab.
    3. Enter Tax ID, TCC (required to generate Copy A, but not required for Copy B) and address.

  • If Stakeholder tax details are not complete, update missing data under the Stakeholder details tab of the same Form 3922 page

    1. The names, addresses, and SSNs can be edited individually by clicking Edit to the right of the stakeholder’s row.
    2. The stakeholder details can also be updated in bulk via Stakeholders > All stakeholders page. Review these instructions to bulk update stakeholder details.

 

5. If the missing data was entered in, return to the Compliance > Section 6039 page and click Generate to click through the steps to proceed and add company contact information. The company contact is formatted into the electronic Copy A .txt file that will be uploaded to the IRS site.


Click Generate Form 3922 to begin the generation of the files.

 

6. Refresh the page after some time if you see a spinning wheel or navigate away and return later.

 

7. Once generated, click Download reports for the tax year to download a .zip file to your local drive that contains all necessary data for Copy A (efile), and Copy B (statements).

 

The .zip file will be split out into the following three files:

  • efile will be a specially formatted electronic .txt file.
    NOTE: Do not edit this file. Only download and upload to the IRS FIRE site. If any data needs to be updated, repeat the initial steps for the same filing tax year to regenerate the reports and download the updated files.
     
  • statements should be delivered to all holders who acquired stock through an ESPP by the January 31st deadline and can be delivered electronically on Carta by clicking the link to Deliver participant statements

 

For any filing questions, contact your tax advisor. 


Who this affects

Public and Private Market companies with an ESPP. 

Timing

This feature can be enabled on demand by reaching out to our support team or Customer Success Managers.

What's Next

The product team will be enhancing Form 3921 functionality to bring it more in line with the new Section 6039 admin experience.   

1099B Cost Basis Report available to Company Admins

What’s new?

We are releasing a report to all Private Market companies for administrators to review their certificate cost basis and original acquisition dates. This report will allow administrators to view cost basis data prior to the delivery of 1099B tax statements to stakeholders by mid-February.

How it works

This in-app report is available by navigating from Capitalization -> Reporting -> Form 1099b cost basis report.

Administrators will be able to view columns like stakeholder details, certificate ID's, quantity of shares sold, date acquired (original acquisition date), proceeds, gain/loss, and including various cost basis fields: 

  • cost_basis_total_certificate = full value going back to the original certificate
  • cost_basis_per_share = cost basis of total certificate / total shares quantity
  • cost_basis_sold_certificate = cost basis per share X sold shares quantity

From this report, Issuers can identify which certificates need to be changed and/or excluded from tax filing, and will have the opportunity to correct the data until late-January.

Who does this impact?

This report will be available to individuals with role permissions of Company Admin, and including Company Editors.

What’s next?

In the next month, Carta's Liquidity team will be reaching out to ensure that data has been reviewed and is considered approved by Issuers for generating 1099B statements. Stakeholders will be able to access tax statements in their portfolios by mid-February.

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