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I could cry!!!! Oh the tax pain I'm about to endure.
Old 02-02-2015, 03:43 PM   #1
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I could cry!!!! Oh the tax pain I'm about to endure.

Just looking for some shoulders to cry on......or sympathize with me to make me feel better.

The company I worked for for 8 years was sold and we were cashed out of our ISO and ESPP plans last year. I knew it was going to be bad. Been paying the Feds extra all year long. Sat with my accountant today and holy crap they want a boat load more.

The ISO were options and shown on w2 with standard taxes taken out. Sadly, some people thought ..."hey this is all mine since taxes were taken out"... And spent the majority of it, not realizing they are in the highest tax bracket now and owe much more. They didn't realize their ESPP shares have not had any taxes taken out of them. Yikes!

Anyway, I'm just venting watching tons of money going to someone other than my family. I am thankful for what I made, it was a blessing...but I can still complain can't I?
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Old 02-02-2015, 03:53 PM   #2
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Sure you can complain.... but how much sympathy do you expect
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Old 02-02-2015, 03:58 PM   #3
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This is a rich man's problem (in relative terms) and better to have than a poor man's problem (no money to even pay taxes on).

Feel better? I didn't thnk so.
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Old 02-02-2015, 04:08 PM   #4
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Yes. It is hard to find out that not all of them are yours to begin with.

Many posters suggest not to include stock options as your net worth, until they are liquidated and money is finally deposited to your account. For ESPP, there is portion of it that you need to pay as ordinary income, so it is never yours for the full value.

If you had that information to begin with, you will then not feel as bad.
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Old 02-02-2015, 04:18 PM   #5
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Poor you. This happened to me once in the heydays of dot boom. I ended up paying the IRS a 6 figure check with my tax return, and 5 figure one to the State. I feel your pain. But it's a good problem to have, my friend. Grin and bear.
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Old 02-02-2015, 04:21 PM   #6
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Many posters suggest not to include stock options as your net worth, until they are liquidated and money is finally deposited to your account.
That's how I handled NQ options. Completely off balance sheet. Cyclical business - value dropped to zero more than once before I managed to cash out during a peak.
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Old 02-02-2015, 05:02 PM   #7
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Perhaps the smarter move would have been to sit with your accountant last year when all this was going on. S/he might not have been able to save you any money, but you would have known what was coming.
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Old 02-02-2015, 05:12 PM   #8
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That's how I handled NQ options. Completely off balance sheet. Cyclical business - value dropped to zero more than once before I managed to cash out during a peak.
Yup. I rode the AAPL roller coaster from 1997 on. That was the very definition of volatility.
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Old 02-02-2015, 05:20 PM   #9
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When I roughed out my taxes last year, I had such a shock that I delayed my retirement to 2015. I would have had a large SERP payment almost entirely in the 33% marginal tax bracket. I would have paid close to $60K in taxes above what I'll pay in 2015.

Right now, my last day is 27 Feb 2015. 15 "in-office" days until retirement.
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Old 02-02-2015, 05:47 PM   #10
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Perhaps the smarter move would have been to sit with your accountant last year when all this was going on. S/he might not have been able to save you any money, but you would have known what was coming.
I did. That's why I have been paying the Feds every quarter.
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Old 02-02-2015, 05:47 PM   #11
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In 2013, I exercised all vested and unvested ISOs in the startup I work at. In hindsight (it's always 20/20 isn't it?) I wish I would have exercised one quarter earlier because the Fair Market Value would have been a lot lower, but I wasn't convinced earlier the company was headed for an IPO.

Ended up paying the feds a five-figure AMT tax bill the following April, and having to do an installment loan because I didn't have enough cash to pay it, and no way I was selling any shares to cover it, because I do think they'll be worth far more down the road.

What really sucks is that even with paying AMT, when I do sell them down the road, I'll still owe long-term capital gains. I know there's some kind of AMT credit I can apply, but I think it's so minimal each year as to be practically worthless.

Oh well, as somebody else posted...I'd rather have the problem of paying taxes than not have the money in the first place.
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Old 02-02-2015, 05:54 PM   #12
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That was the reason why, whenever I sold or exercised any options, or any security, I set the money aside in the "estimated taxes" account in Quicken, so that it never appeared as money I could use for any other purpose.

You don't want to know how much was "sitting" in that account in 1999. But it did keep me from crying over it.
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Old 02-02-2015, 05:55 PM   #13
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Anyone who has more than a few options or even ESPP shares should get to know a CPA.

Seriously.
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Old 02-02-2015, 05:58 PM   #14
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Originally Posted by LoneAspen View Post
In 2013, I exercised all vested and unvested ISOs in the startup I work at. In hindsight (it's always 20/20 isn't it?) I wish I would have exercised one quarter earlier because the Fair Market Value would have been a lot lower, but I wasn't convinced earlier the company was headed for an IPO.

Ended up paying the feds a five-figure AMT tax bill the following April, and having to do an installment loan because I didn't have enough cash to pay it, and no way I was selling any shares to cover it, because I do think they'll be worth far more down the road.

What really sucks is that even with paying AMT, when I do sell them down the road, I'll still owe long-term capital gains. I know there's some kind of AMT credit I can apply, but I think it's so minimal each year as to be practically worthless.

Oh well, as somebody else posted...I'd rather have the problem of paying taxes than not have the money in the first place.
The AMT credit can be large if there was a big different between the option price and the value the day it was exercised. That is, if you owe AMT for other reasons, which I did the years I finally sold those particular shares. It did help my tax bill considerably.

So maybe a strategy is to wait for a year when you owe AMT anyway.
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Old 02-02-2015, 06:00 PM   #15
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Anyone who has more than a few options or even ESPP shares should get to know a CPA.

Seriously.
Except we had to educate a CPA firm back in 1997 which is when we realized we had it figured out well enough ourselves. But, yes, CPAs became much more educated on this issue by 2000.
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Old 02-02-2015, 06:16 PM   #16
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[...]
Ended up paying the feds a five-figure AMT tax bill the following April, and having to do an installment loan because I didn't have enough cash to pay it, and no way I was selling any shares to cover it, because I do think they'll be worth far more down the road.
A company I worked for in the late 90's (pre-bust) was acquired and our VP of Marketing did the same thing.

Unfortunately, during the 6 month lockout period post-acquisition our acquiring company's stock went from around $60 to around $6.

He was majorly stuck - not sure if he had to declare bankruptcy, but it wasn't a good thing.

Personally I'll always make sure to cash out enough to cover taxes (not as much an issue these days as ISOs are less common)

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What really sucks is that even with paying AMT, when I do sell them down the road, I'll still owe long-term capital gains. I know there's some kind of AMT credit I can apply, but I think it's so minimal each year as to be practically worthless.
It's not at all worthless.

Basically the maximum credit you can get is the difference between your "real" tax bill and the AMT amount that year. So in upcoming years, if your AMT is lower than your "real" taxes, you'll pay the AMT instead. This can be a substantial difference when you don't have AMT items.

This continues until you've "earned back" the entire amount you prepaid in AMT.

The rules have changed a little since I last looked at this, but this appears to have a lot of the details: AMT Credit
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Old 02-02-2015, 06:26 PM   #17
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It's not at all worthless.

Basically the maximum credit you can get is the difference between your "real" tax bill and the AMT amount that year. So in upcoming years, if your AMT is lower than your "real" taxes, you'll pay the AMT instead. This can be a substantial difference when you don't have AMT items.

This continues until you've "earned back" the entire amount you prepaid in AMT.

The rules have changed a little since I last looked at this, but this appears to have a lot of the details: AMT Credit
Oh good point! I had forgotten about that little gem. So it works even if you otherwise wouldn't pay AMT - even better.
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Old 02-02-2015, 06:36 PM   #18
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My employer consistently under withholds when I receive a bonus or I cash in on some stock options (NQ). So every time I receive such income, I re-run Tax Caster to determine the extra tax liability owed and send a check to the Feds soon after. I haven't had any bad surprise yet.


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Old 02-02-2015, 08:55 PM   #19
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I did. That's why I have been paying the Feds every quarter.
My apologies. How come s/he was off so much?
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Old 02-02-2015, 09:25 PM   #20
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The bad nasty is when you are credited for stock at $ but when you exercise it the value is ---$. Ought to be a law. My daughter's observation is that the recipient of such shares needs to sell enough to pay taxes.
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