Subject: Tax bracket equal to 311% of my actual gain and 30 plus years to have my overpayment returned, ISO-AMT is beyond excessive! Comment: Dear Panel Members, I write you from House Minority Leader Pelosi's district, in San Francisco CA. I beckon you to do everything in your power to reform the ISO-AMT provisions. Enclosed below please find my testimony to the House Ways & Means Oversight Sub-Committee last June. Statement from Mike Fleisher To the House Committee on Ways and Means, Subcommittee on Oversight Washington, D.C. – June 2004 Like so many others, my former employer issued me Incentive Stock Options several years ago. I am no financial whiz, so I sought advice from a highly-respected accounting firm in San Francisco on how to best deal with the potential tax consequences. I paid several thousand dollars for the advice, which I followed, and now, I find myself in the following predicament. On calculating my year 2000 income tax, the combined state and federal taxes came to $80,000 due to the Alternative Minimum Tax. In a good faith effort, I sold the stock in January of 2001 for $26,000. That’s right, the taxes I owed were equal to 311% of my actual gain. I’m glad to pay any percentage of tax, even up to 100% of my gain, but a tax in excess of 300% is difficult to comprehend. I gave the state of California and the IRS my entire stock gain, and all of my additional savings, but I still "owed" in excess of $45,000 on a $26,000 gain!! And the IRS adds penalties and interest every day… my liability has incurred over $10,000 in interest and penalties so far!! I can’t use my phantom gain to pay off my debt – the government only accepts real income and I never actually had real money from the stock. I had to look to other income (my salary), on which I first paid normal income tax to pay the tax on my “phantom gain.” Unfortunately, I’ve since been laid off. I’ve given the state and the IRS all of my savings. Nevertheless, I'm told that although I have tens of thousands of dollars in AMT and Capital Gains credits, I have to pay my “debt” now. I can collect my credit at a rate of roughly $2000/year over the next 30+ years. And, although I must pay significant interest on my “debt,” the IRS will pay me no interest (or penalties) for the credits which I'm owed. The AMT was designed to prevent the wealthy from avoiding paying taxes. I’m not wealthy, nor am I trying to avoid paying taxes. I am an honest hard-working taxpayer. I tried to understand this portion of the tax code that even Taxpayer Advocate Nina Olsen sees as extremely confusing and problematic. I went to highly respected accountants. I’m still trapped. I've contacted the IRS on multiple occasions to discuss this issue. Each time the individuals with whom I've spoken tell me that they agree with me that the law is unjust, but my only recourse is through legislative action. Please address this situation! The tax law should not be so confusing that – even with the planning advice of accountants -- a taxpayer owes 311% of actual gain. Clearly this is not what the law intended. Thank you for your consideration, Mike Fleisher, San Francisco, CA |