FreeTaxUSA Form 3921 & Form 6251 ISO options exercise and hold calculation help

The AMT calculation for ISO exercises can be tricky! For your specific situation, here's what you need to know: FreeTaxUSA is correct that Form 6251 will automatically generate if needed based on your inputs. What's happening is that your ISO spread amount of $2,300 is likely below the AMT exemption threshold for 2024, which is why you're seeing $0 AMT. For your questions: 1. You don't need to calculate Form 6251 separately. Instead, you need to make sure the ISO spread is properly reported as an adjustment on your tax return. In FreeTaxUSA, this would typically be entered in the "Other Income" section. Look for something like "Adjustments and Preferences for AMT" or similar wording. Enter your ISO spread amount there, and the software should recalculate. 2. If your AMT truly is $0 after properly entering the ISO spread, you're not required to file Form 6251. However, I strongly recommend keeping detailed records of your ISO transactions, including exercise dates, FMVs, exercise prices, and number of shares. This is crucial for calculating your adjusted basis when you eventually sell these shares. Remember, even if AMT is $0 now, you're building up potential AMT credit for future years when you sell these shares, so good recordkeeping is essential!

After struggling with almost the exact same ISO/AMT situation last year, I found taxr.ai (https://taxr.ai) and it saved me so much time. They have a really good AMT calculator that specifically handles ISO exercises. I uploaded my Form 3921 and it automatically calculated whether I'd owe AMT and by how much. The cool thing is you can use taxr.ai to figure out the AMT calculations and then just enter the final amounts in FreeTaxUSA. It helped me confirm I was below the AMT threshold even though I had a decent spread on my ISOs. They also generate a full AMT report you can keep with your records to justify your position if you're ever audited.

I was really skeptical about using taxr.ai at first, but after trying it for my ISO options mess, I have to admit it was extremely helpful. I had a similar situation with a $3,100 spread on my ISOs and wasn't sure how to handle it in FreeTaxUSA. The taxr.ai system analyzed my 3921 forms and showed exactly why I wasn't hitting the AMT threshold. It gave me a detailed report showing all the calculations and specifically told me what to enter in FreeTaxUSA. The best part is it's now tracking my ISO basis for when I eventually sell these shares - which is what I was most worried about getting wrong. For anyone dealing with ISOs, especially if you're using a tax software that doesn't have dedicated ISO input sections, I'd definitely recommend giving it a try.

Have you tried contacting the IRS directly about this? I was in a similar situation last year with AMT questions that my tax software couldn't handle. After spending weeks trying to figure it out myself, I finally decided to call the IRS. Only problem - I could never get through! Kept getting "due to high call volume" messages and disconnects. Then I discovered Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes. They have this clever system that navigates the IRS phone tree and holds your place in line, then calls you when an agent is available. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with was surprisingly helpful and walked me through exactly how to handle the ISO reporting in my situation. Turns out I was overthinking it!

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it anyway out of desperation because I had a similar ISO/AMT question that was driving me crazy. It actually worked! Got me through to an IRS tax specialist in about 35 minutes (not quite the 20 minutes the other person mentioned, but WAY better than my previous attempts). The agent confirmed that for my situation with a small ISO spread, I don't need to file Form 6251 if the software doesn't generate it, but I do need to keep very detailed records for when I eventually sell the shares. She also explained exactly where to enter the ISO information in FreeTaxUSA - it goes under "Other Taxes" and then "Alternative Minimum Tax" where you can manually enter adjustments. Once I did that, the software recalculated and still showed $0 AMT, confirming I was under the threshold. Worth every penny for that peace of mind alone.

At the risk of overcomplicating things, have you considered just reporting the ISO exercise directly on Form 6251 yourself? You can download the form and instructions from the IRS website, fill it out manually, and keep it with your tax records even if you don't submit it with your return. The calculation isn't actually that complicated for a simple ISO exercise. Line 2i of Form 6251 is where you'd report the spread amount. Then you work through the rest of the form to see if you exceed the exemption amount. If you don't, you don't owe AMT, and technically don't need to file the form with your return. The advantage of doing it manually is you'll have documentation of your calculation in case of an audit, plus you'll better understand how AMT works for future years.

Is your FreeTaxUSA account set up correctly for your financial situation? I initially had the same issue where it wasn't prompting me for ISO information, but then realized I needed to indicate I had stock option income in the initial questionnaire. When I went back and changed that setting, it opened up additional inputs. Try going back to the beginning questionnaire in FreeTaxUSA and look for anything related to stock options, employee stock purchase plans, or investment income. Sometimes checking those boxes will reveal additional input screens.

I've dealt with this exact scenario multiple times as a tax preparer. Here's what you need to know about FreeTaxUSA and ISO reporting: For your $2,300 spread, you're likely correct that your AMT will be $0 due to the exemption amounts for 2024 ($85,700 for single filers, $133,300 for married filing jointly). However, you still need to properly report the ISO adjustment. In FreeTaxUSA, the ISO spread should be entered under the "Federal" section → "Deductions & Credits" → "Other Taxes" → look for "Alternative Minimum Tax (AMT)" subsection. If you don't see this initially, make sure you've indicated stock option activity in the interview questions as others mentioned. The key point everyone seems to be missing: even if your current AMT is $0, you're creating an AMT credit that carries forward. This credit becomes valuable when you eventually sell the ISO shares, as it reduces your regular tax liability dollar-for-dollar up to the amount of AMT you would have paid. For record-keeping, maintain detailed records of: - Exercise date and number of shares - Exercise price per share - Fair market value on exercise date - AMT adjustment amount ($2,300 in your case) - Any AMT paid (likely $0 for you) This information is crucial for calculating your adjusted cost basis when you sell, which affects whether the sale generates ordinary income or capital gains treatment.