Subject: dismayed at the fact that it is our own government's ISO-AMT tax assessment that has thwarted our ability to retire Comment: Dear Honorable Chairmen Mack & Breaux, please find our testimony given to Ways & Means last Summer. We respectfully rely on your leadership and support to right this terrible injustice. Statement from Debbie Watson To the House Ways and Means Committee, Subcommittee on Oversight Washington, D.C. June 2004 Early in 2000, my husband and I took steps to prepare for retirement by exercising Incentive Stock Options (ISOs). Due to the way that the IRS treats Incentive Stock Options and Capital Gains, we thought that we needed to hold the stock for at least one year. We were surprised to learn that under the Alternative Minimum Tax rule, we were taxed at the market value on the day of exercise even though we didn't sell the shares. In order to set aside enough money to pay the AMT – a staggering amount of nearly a quarter of a million dollars ($246,000) – we had to sell even more stock than we had set aside for retirement. We then had to pay taxes on those assets, as well. Now our tax burden - above and beyond what we paid in income tax deducted from our salaries - was nearly a half a million dollars ($493,000)! We are not wealthy people. I am not a senior executive. I have simply been working at the same company for many, many years and have been awarded stock options for my hard work. My husband is a police officer. This situation has entirely depleted the retirement that we have been accumulating for twenty years. We will both have to work more years (a lot more years) because of this taxation policy. We are dismayed at the fact that it is our own government's tax assessment that has thwarted our ability to retire. To make matters worse, our accountant and the IRS have confirmed we are unlikely to ever recover the taxes that we have overpaid. Any help in recovering our nest egg would be greatly appreciated. Debbie Watson Portland, OR 3rd Congressional District |