Subject: AMT on incentive stock options Comment: I am an average middle class employee. In 2000, I worked for an internet company called Critical Path. I received incentive stock options as part of my compensation. I exercised the stock and have not sold it. No one ever advised me to sell the stock before the end of the calendar year to avoid certain Alternative Minimum Tax problems. By the time my accountant prepared my income tax bill for 2000, the Alternative Minimum Tax on my stock was $64,000. This is despite the fact that the current value of the stock at the time was only $8,000 (and is now worth only $2000). The $64,000 tax bill far exceeded my net worth. I paid the entire $64,000 tax bill on April 15, 2001 and generated a $64,000 tax credit, by liquidating savings and borrowing money from my family. At this rate, it will take me over 20 years to use up my AMT credit because the tax code allows me to apply only $3000 of my AMT credit towards my income tax each year. Essentially, I have been forced to make a $64,000 20-year loan to the government interest-free. Some day my wife and I would like to buy a house and send our daughter to college, but both of those plans are on hold until we can regain our financial standing. After my parents loaned me money to pay my tax bill, the rest of the family is feeling the financial pain, too. My parents, who are both in their 60s, no longer feel that they have enough money for their retirement. All these changes – to pay tax on income I never actually received. Please fix the tax code to better reflect reality, and please find a way to accelerate taxpayers’ ability to recover AMT credits. Taxes should not exceed the value of the actual gain or stock being taxed. Mike Wertheim Oakland, CA |