Posted: May 05, 2005 By: Steve Mazingo

Subject: ISO AMT

Comment: Date: March 17, 2005
Steve Mazingo, an individual taxpayer
474 Solana Real
Fallbrook, CA 92028
(760) 724-3037

Subject: Extreme Negative Consequences of The Alternative Minimum Tax (AMT) and Incentive Stock Options (ISOs)

Submission to The President's Advisory Panel on Federal Tax Reform
Date: March 17, 2005
To: The President's Advisory Panel on Federal Tax Reform
From: Steve Mazingo, an individual taxpayer
Subject: Extreme Negative Consequences of The Alternative Minimum Tax (AMT) and Incentive Stock Options (ISOs)

Dear Panel Members,
My wife and I are among other middle-class Americans who have been hugely impacted by the Alternative Minimum Tax (AMT) law regarding Incentive Stock Options (ISOs). We are both in the technology industry and have been for our 20-plus year careers. In 1998, I joined a Silicon Valley startup. Within 18 months, I exercised incentive stock options and we were instantly "millionaires" on paper. However, as a result of the AMT, we were also liable for nearly $300,000 in federal income taxes. Unfortunately, our stock value plummeted in 2001 with the rest of the NASDAQ.
Although we never realized financial gain from our stock, our $300,000 AMT federal tax liability remains. We liquidated as much as we could, including our retirement savings and children's college funds, but could only pay a fraction of our tax liability. We are honest, hardworking Americans who have come to have a tax liability that exceeds our ability to pay.
We have tried to reach a reasonable compromise with the IRS, but to date, our offer in compromise with the IRS has been rejected. In reviewing our case, the IRS has consistently failed to consider the special circumstances under which we’ve encountered this liability and has failed to exercise any flexibility under the Effective Tax Administration guidance of the IRS offer in compromise program. We have filed an appeal, but fear that if the appeal too is rejected, we will be forced to sell our family home and make large monthly payments to the IRS.
We, and hundreds like us, need -- and deserve -- to start re-planning our financial future and figuring out how we're going to send our children to college! I am a first generation high school and college graduate who worked hard over 20 years to build the life and the financial security we had. That life and the security have been ripped away unjustly and with little recourse.
Please help us, and quickly. We are hopeful that the President's Advisory Panel on Federal Tax Reform will recognize that the AMT and its impact on families like ours are unfair or distorted. We are also hopeful for your support for a remedy for ISO/AMT cases to provide help to many Americans in this unfortunate and unintended situation.
Sincerely,
Steve Mazingo
474 Solana Real
Fallbrook, CA 92028
(760) 724-3037