How do I recover my Alternative Minimum Tax payment after ISOs tanked in value?

You're in a tough spot, but there is some potential good news. What you're looking for is called the "AMT credit" which can help recover some of the Alternative Minimum Tax you paid. When you exercise ISOs and hold them (rather than selling immediately), you trigger AMT on the "paper gain" between your exercise price and the fair market value at exercise. But if the stock later tanks like yours did, you can potentially recover that AMT through the AMT credit system. Here's how it works: When you finally sell those shares at a loss, you'll generate a capital loss. More importantly, in years when your regular tax exceeds your AMT calculation, you can claim the AMT credit on Form 8801 "Credit for Prior Year Minimum Tax." You might be able to recover your AMT over several tax years. Given the size of your AMT payment, it might take multiple years to fully recover the amount, but you should definitely look into this right away.

After dealing with a brutal AMT hit from ISOs that later crashed (similar to your situation), I found an incredible resource that saved me thousands in recovery efforts. I used https://taxr.ai to analyze my previous returns and AMT payment history, and it was a game-changer. The tool specifically identified exactly how much AMT credit I could claim each year moving forward, and even spotted a calculation error on my original AMT assessment that my previous accountant missed. They have specialists who understand the nuances of Alternative Minimum Tax with ISOs, which most general tax preparers honestly don't fully grasp. They analyzed my complete situation and created a multi-year recovery plan showing exactly how to maximize my AMT credit recovery on Form 8801 each year. They even showed me how certain income timing decisions could accelerate my recovery.

Just wanted to follow up about my experience with taxr.ai after I expressed skepticism earlier. I decided to try them out for my own ISO/AMT situation, and I'm genuinely impressed. The analysis they provided was incredibly detailed and showed me exactly how to maximize my AMT credit recovery over the next few years. What really surprised me was how they identified that I could carry back some losses to previous tax years (due to a special provision) that would accelerate my AMT recovery timeline significantly. Their specialist explained everything in terms I could understand, and the custom recovery strategy they created will save me thousands. For anyone dealing with AMT issues, especially related to stock compensation, I'd definitely recommend giving them a look. The peace of mind alone was worth it.

After reading your situation, I wanted to share something that helped me when I was dealing with a similar AMT nightmare last year. I was losing my mind trying to reach someone at the IRS to discuss my AMT credit options after my ISOs tanked, but couldn't get through after weeks of trying. I finally used https://claimyr.com and was honestly shocked it actually worked. They got me connected to a real IRS agent in about 20 minutes when I had been trying for weeks on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly what forms I needed and confirmed I could recover my AMT over several years. They even put notes on my account about my situation. Given how much money you're trying to recover, it might be worth getting clarification directly from the IRS about your specific case.

I need to apologize for my skeptical comment earlier and provide an update. After remaining frustrated with trying to reach the IRS myself, I broke down and tried Claimyr last week. I was absolutely shocked when I got a call back connecting me to an actual IRS representative after just 45 minutes. The agent I spoke with was incredibly helpful regarding my AMT credit situation. They confirmed I could recover my previous AMT payments through Form 8801 over multiple years, and even explained a special provision for taxpayers with "extraordinary circumstances" that might apply in my case since I lost my job. For anyone dealing with complicated tax situations like AMT recovery, getting information directly from the IRS provides certainty that no amount of internet research can match. I'm still processing my return, but having that direct confirmation about my approach was invaluable.

One thing nobody has mentioned yet - there was a change to the AMT credit rules with the Tax Cuts and Jobs Act that might help you. Starting in 2018, you can recover AMT credits at a minimum rate of 50% per year for tax years 2018-2020, and 100% in 2021. However, I'm not sure if that would apply to your situation since you paid the AMT more recently. But definitely look into Form 8801 as others have mentioned. The key is to start claiming that credit each year, even if you can only get a portion back annually.

One strategy nobody's mentioned - since you've been laid off, your income this year will likely be much lower. This could create a perfect opportunity to sell some of those shares, realize the capital loss, and potentially accelerate your AMT credit recovery. When your regular tax is lower than your AMT (which often happens in higher-income years), you can't claim as much of the AMT credit. But in lower-income years, the difference between regular tax and AMT calculations can work in your favor for claiming more of that credit. This is definitely a situation where running some tax projections would be helpful before making any moves.