I'm a detail guy who is doing my son's taxes. I've never dealt with ISOs in my 55 years of preparing tax filings for family members. Admittedly, I rarely encounter AMT. I use Turbo Tax, and I'll take it to that software and follow the yellow brick road... worksheets, fill in the blanks, etc. BUT I LIKE TO UNDERSTAND WHAT'S HAPPENING! So thank you for posting this. BUT... You have confused me on the various tax years. To wit: @8:00 you showed the tax year on the form 6251 as 2020, when it should have been 2021. Because nobody exercised anything in 2020 and there was nothing to report. But the ISO was exercised in June 2021 and that required reconciliation in TY2021. THEN... your Form 3921 was tragically obfuscated, on the same point: Your inset video masked the TAX YEAR of that form; I presume it was in the upper right corner.
A helpful video. But just FYI, you don't generate alot of confidence when the thumbnail image for this video says "Incetive Stock Options..." You should take the time to proof-read your own text...or at least correct it after! Its been up for 4 months!!
Thank you so much for this video. I think it would be better to also add the add tag for AMT and Alternative minimum Tax here as it did not show up when I searched amt.
In scenario 2, if you exercised the stock and then sold it later in the year for less (let's say 35$), how would it be taxed? Would I add the bargain element ($2500) to my ordinary income and show a capital loss of $1000, or would I simply add $1500 as ordinary income?
My CPA advised I exercise ISOs when the stock price was the highest, to lock in a high cost basis. I told her I thought the stock was overbought by $100/share. Now I owe income tax on twice the current value and I triggered AMT. Why did she give me this advice? I don’t have the funds to pay the tax, so now I have to sell underwater shares. Did her advice just leave me nothing other than 10 years of tax overpayment credits and capital loss credits?
Great video. Thanks for giving the 5 examples. Much appreciated.
Thank you so much! I like to fully understand my taxes and do them myself. This helped so much!
I'm a detail guy who is doing my son's taxes. I've never dealt with ISOs in my 55 years of preparing tax filings for family members. Admittedly, I rarely encounter AMT. I use Turbo Tax, and I'll take it to that software and follow the yellow brick road... worksheets, fill in the blanks, etc. BUT I LIKE TO UNDERSTAND WHAT'S HAPPENING! So thank you for posting this. BUT...
You have confused me on the various tax years. To wit: @8:00 you showed the tax year on the form 6251 as 2020, when it should have been 2021. Because nobody exercised anything in 2020 and there was nothing to report. But the ISO was exercised in June 2021 and that required reconciliation in TY2021. THEN... your Form 3921 was tragically obfuscated, on the same point: Your inset video masked the TAX YEAR of that form; I presume it was in the upper right corner.
A helpful video. But just FYI, you don't generate alot of confidence when the thumbnail image for this video says "Incetive Stock Options..." You should take the time to proof-read your own text...or at least correct it after! Its been up for 4 months!!
Appreciate the feedback!
Thank you so much for this video. I think it would be better to also add the add tag for AMT and Alternative minimum Tax here as it did not show up when I searched amt.
Great suggestion, thank you!
Great video, thank you. Does the ISO maximum $100K rule apply here?
In scenario 2, if you exercised the stock and then sold it later in the year for less (let's say 35$), how would it be taxed? Would I add the bargain element ($2500) to my ordinary income and show a capital loss of $1000, or would I simply add $1500 as ordinary income?
My CPA advised I exercise ISOs when the stock price was the highest, to lock in a high cost basis. I told her I thought the stock was overbought by $100/share. Now I owe income tax on twice the current value and I triggered AMT. Why did she give me this advice? I don’t have the funds to pay the tax, so now I have to sell underwater shares. Did her advice just leave me nothing other than 10 years of tax overpayment credits and capital loss credits?
If you sale the ISO in the same year you exercise them, can you effectively avoid paying AMT on the ISO?
Correct
On Scenario # 3 you got Bargain Element of $2,500 multiplying $20 by 100? Please correct or explain?
Great catch. Look like a typo. Bargain element should be the $25 * 100. The Market price ($45) - Exercise Price ($20)