Subject: ISO AMT Comment: Michael & Jennifer Carrobis 35 Newfane Rd Bedford, NH 03110 Our ISO/AMT Nightmare My name is Michael Carrobis. My family and I have been living with the results of our ISO/AMT nightmare since 2001. Our journey began with the filing of our 1999 Income Tax return. My adjusted gross income for 1999 rose by $73,800 over 1998, a little more than a 65% increase. Our tax liability rose from $15,888 for 1998 to $119,929 for 1999, more than a 700% rise over 1998. When penalties and interest was added the total tax Liability for 1999 was over $152,000, over a 900% increase. How could our tax liability grow by more than 700% (more than 900% with penalties and interest) when my adjusted gross income rose by 65%? In 1999 I exercised incentive stock options that granted me stock valued at $274,258. I took the stock and put it into my brokerage account. It wasn’t until we filed our taxes that we found that the stock I received was considered income. I didn’t sell the stock but it was considered income anyway. To complicate matters the accountant I had doing our 1999 tax return had been going through some problems and delayed the filing of our taxes by about six months. All this time (unbeknown to us) penalties and interest was accruing. When we saw our 1999 return in January of 2001 we were stunned. During the year $22,757 of tax was withheld from my W2 income. We looked at our tax return and found that we now owed an additional $97,172. We sold my stock received in 1999 (and some stock from options received in 2000) and paid the additional 1999 taxes ($97,172) immediately upon filing our return. We were then stunned a second time by a notice of penalties and interest for 1999(in excess of $32,000). The fun doesn’t stop here. As I stated above I had also received incentive stock options for 2000. We decided we better move forward as soon as possible with 2000 taxes. When I exercised the 2000 stock options much of the stock was valued at about $85 per share. When I sold the stock I sold much of it in the $40 per share range. We weren’t happy at the stock price dropping by more than half but we thought it was ok since we really only paid about $20 per share for the stock. We still doubled our money right? Wrong. According to the rules we actually made $85 per share not the $40 per share we actually sold it at. According to the rules we didn’t double our money we more than quadrupled our money. What? How can that be? How can you tax us on another unrealized gain? What that unrealized gain equated to in our 2000 taxes was a tax liability of over $267,000. At this point we did not have $267,000. Not in savings or our regular stock account. We inquired about an offer in compromise. Our new accountant said that the IRS would not accept one because we owned too much, we have a house with a mortgage, a couple of cars and monies in IRA accounts. So in order to pay the 2000 tax bill we liquidated stock in two of our IRA accounts and paid our 2000 tax bill. The story is not over. The monies we took out of our IRA accounts (to pay our taxes) are considered income we received. So our 2001 tax liability is in excess of $116,000. The number rose to around $180,000 with penalties and interest. We did not have $180,000 to pay the IRS. We hired a tax attorney to look into what we could do. After spending thousands of dollars more our outstanding tax liability is still around $135,000. We have paid over $500,000 in federal income taxes for 1999 and 2000. We still own the outstanding taxes from 2001. Our lives got a little more complicated in 2002 when I got laid off from my high tech sales job. I was unable to find work for two years. During these two years we lived on what we had left in a Roth IRA. I finally found a commission only sales job about eight months ago. We still have an outstanding balance of around $135,000. Our nightmare started with our ISO/AMT in 2001. Hopefully it will end soon. What started with ISO/AMT and unfair tax law will end (hopefully) with our chapter 13 bankruptcy filing. Maybe now we can file an offer in compromise that will not tax us continually into the future. |