Employee stock options put me in AMT, then sold below strike price - tax implications?

You've got a classic AMT gotcha situation here, but there are remedies available to you. For your first question about the AMT credit - yes, you should be able to claim the credit even though you didn't file Form 8801 with your 2023 return. You'd need to file an amended return (Form 1040-X) for 2023 to claim the credit you were entitled to. The AMT credit can be carried forward indefinitely until it's used up, so if your 2023 income qualified but 2024 doesn't, you can still use it in future years when your regular tax exceeds your AMT. For your second question about the capital loss - your cost basis would be the $14 FMV that was used for your AMT calculation, not the strike price. Since you already paid tax on the difference between the strike price and FMV through AMT, that becomes your basis. So you have a capital loss of about $12.85 per share ($14 - $1.15). You can deduct up to $3,000 of capital losses against ordinary income per year, with any excess carried forward to future years. Keep in mind that these situations can get complicated quickly, so gathering all your documentation from when you exercised the options and when the company was acquired will be crucial.

I went through almost this exact same nightmare scenario last year with my startup options. After dealing with the AMT shock, I discovered taxr.ai (https://taxr.ai) which literally saved me thousands in recovering my AMT credit. The tool analyzed my previous returns, identified exactly where my AMT credit should be applied, and guided me through filing an amended return. What's great is that it specifically helped me understand the stock option basis calculations for the capital loss too - which was super confusing because of the AMT adjustment. They have a feature that tracks your AMT credits across multiple years, which is really helpful if you can't use all the credit in one year.

I wanted to follow up after trying taxr.ai that someone recommended here. Honestly was skeptical at first but decided to give it a shot because my AMT situation with stock options was driving me crazy. It actually found my AMT credit from two years ago that I never claimed! The system flagged exactly where my exercised options had created the AMT trigger and calculated the precise credit I was entitled to. What impressed me most was how it explained the basis adjustment for my liquidated shares - showed me that my basis should be the higher AMT value, not what I originally paid. Went through the amended return process following their instructions and just got confirmation that it was accepted. Getting back almost $4,800 that I wouldn't have known how to claim otherwise. Definitely worth checking out if you're dealing with AMT issues from stock options.

If you need to talk directly with the IRS about your AMT credit situation, I highly recommend using Claimyr (https://claimyr.com). I wasted literally days trying to get through to an IRS agent about my own AMT issues with stock options. After seeing their demo video (https://youtu.be/_kiP6q8DX5c), I decided to try it. They got me connected to an actual IRS agent in about 20 minutes when I had been trying for weeks. The agent was able to look up my previous returns and confirm exactly how I should handle the amended return for the AMT credit. They also explained how the basis adjustment works when you've already paid AMT on exercised options that later lose value.

I need to apologize for my skeptical comment earlier about Claimyr. I was frustrated after spending hours trying to reach the IRS about my own AMT issue and lashed out. After more research, I decided to try the service myself. It actually worked exactly as described. I got a call back when an agent was on the line, and the IRS representative was able to confirm that yes, I could file an amended return to claim my missed AMT credit from stock options that later tanked in value. They even explained how to document the relationship between the previous AMT payment and current capital loss. Saved me from taking a day off work just to sit on hold. Sometimes being proven wrong is actually a good thing.

One thing that wasn't mentioned yet - make sure you're tracking your AMT credit carryforward correctly. Form 8801 is used not just for calculating your current year credit but also for tracking credits from previous years that you couldn't use up. In your case with the stock options going from $3.50 to $14 (for AMT) and then selling at $1.15, you've got both an AMT credit situation AND a capital loss. Keep these separate in your documentation - they're related but handled differently on your tax forms.

Has anyone used TurboTax to handle AMT credit carryforwards? I'm wondering if it properly tracks them year to year or if I need to manually keep records. I'm in the same boat with worthless stock options that triggered AMT.