Will I get caught? (AMT a bitch for ISO's in private company)
April 9, 2011 10:56 AM Subscribe
Will I get caught if I don’t report the purchase of my PRIVATE COMPANY ISO’s? (AMT is a bitch!)
posted by sharingideas to Work & Money (9 answers total) 5 users marked this as a favorite
Here is the *hypothetical* situation... :-)
I have a large amount of stock options in a private startup company. If I leave the company, I will have 90 days to decide whether to exercise my options. Due to the sheer number of options, it will be several hundred thousand $$’s in AMT when I purchase them. But, this isn’t a public company and I can’t sell the shares. So, I’d be in that horrible place of needing to pay a ton of tax on stock I didn’t receive any actual cash from. Because of the messed up AMT ... I will owe enormous taxes on the "paper profits".
While I do expect that the stock will eventually be worth something (and happy to pay the tax at that time), that could be several years from now. And, you never know... the stock may never materialize to anything.
Simple question for anyone that’s been in this position and/or is a tax person and has seen it play out for others: If I simply don’t report the purchase... who will know?? The purchase transaction is essentially just a check from me to my company (doesn’t involve my bank or any public exchanges), so am I just a fool to report this? I’m seriously considering buying the stock and then just paying the tax when I eventually sell the shares. Or, if I even knew what the risks were (I'm happy to pay excessive penalties, but jail time isn't really something I'm too excited about.) Could another option be to report the situation but then ask the IRS for a payment plan so that I can potentially see liquidity on the shares in time to pay the IRS?
I will definitely consult with a tax accountant before deciding my true course of action, but I’d like to start with you guys for general direction, articles, personal experiences, etc. And, I may not leave the company at all... but I want to have a well-formed strategy in any case.
Thanks for whatever ideas you can offer.