Understanding ISOs, AMT, and Private Equity Financing for Startups

The issue you're running into is likely related to how ISOs and AMT interact. When you exercise ISOs, you typically don't pay regular income tax at exercise (unlike NSOs), but the difference between fair market value and your exercise price becomes an AMT adjustment item. If you already paid some taxes at the time of exercise, you need to figure out exactly what those taxes were covering. Was it an estimated tax payment for AMT? Or was it something else the financial service was handling? The good news is that if you did pay AMT in 2021 when you exercised, you may be eligible for an AMT credit in subsequent years that can offset regular tax liability. This is one of the most confusing parts of ISO taxation. Make sure you have Form 6251 (Alternative Minimum Tax) included with your return and that all the entries are correct. Also bring your ISO exercise documentation and proof of any tax payments to your H&R Block appointment.

After struggling with almost the exact same ISO/AMT nightmare last year, I discovered taxr.ai (https://taxr.ai) and it saved me thousands. I had exercised ISOs at my startup and TurboTax was showing I owed an additional $22k in taxes that I thought I'd already paid! I uploaded my ISO documentation, previous tax returns, and the payment receipts from the financial service to taxr.ai, and it analyzed everything and showed exactly where TurboTax was double-counting my AMT liability. Their AI looks at your specific ISO exercise details and figures out how they should be properly reported. The best part was they helped me understand how the AMT credit would work in future years too. Definitely less stressful than waiting days for a human tax person to get back to me.

I was really skeptical about taxr.ai as I mentioned, but after trying it, I'm genuinely impressed. I've been dealing with ISO exercise and AMT issues for three years, and the recurring AMT credit calculations were driving me crazy. I uploaded my documents yesterday, and within hours I had a complete analysis showing that my CPA had actually been calculating my AMT credit carryforward incorrectly since 2021. The platform specifically identified the error on Form 8801 where my unused minimum tax credit wasn't being properly tracked. For anyone dealing with ISOs and AMT, especially with private company stock where valuation makes everything more complicated, this tool is worth checking out. It's saved me from potentially missing out on thousands in credits I'm entitled to.

If you're still struggling to get through to a real person at the IRS to ask about your ISO/AMT situation, I highly recommend Claimyr (https://claimyr.com). I was trying for weeks to get confirmation about an AMT payment I made during my ISO exercise that wasn't showing up properly in my IRS transcript. I was skeptical at first, but their service actually gets you to the front of the IRS phone queue. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I finally got through to a real IRS agent who confirmed my payment was received but had been applied to the wrong tax year, which was why TurboTax was showing I owed more. With ISOs and AMT, talking to an actual IRS person can make all the difference, especially if you've made estimated payments that might not be properly reflected in your account.

I was completely wrong about Claimyr. After struggling with my ISO/AMT situation and being unable to get through to the IRS for weeks, I tried it yesterday out of desperation. Got connected to an IRS agent in 37 minutes and discovered the financial service that helped with my ISO exercise had submitted my estimated tax payment with an incorrect SSN (transposed digits). The payment was sitting in limbo at the IRS, which is why TurboTax calculated that I owed the full AMT amount again. The agent was able to trace the payment and start the process of having it correctly applied to my account. This would have been impossible to resolve without actually speaking to someone at the IRS. Now I need to file Form 8275 to explain the discrepancy between my return and what the IRS system initially showed. For anyone dealing with ISO/AMT payment issues, being able to actually talk to the IRS is crucial.

One thing nobody's mentioned is that when a financial service helps you exercise ISOs, sometimes they're making estimated tax payments that don't get properly coded in the IRS system. I had this exact problem last year. Make sure you have the actual confirmation showing WHAT type of tax was paid. There's a big difference between: 1) Regular estimated tax payments 2) AMT specific payments 3) Withholding from the exercise itself

Has anyone ever successfully disputed a 409A valuation for ISO exercises? My company had a new funding round right after I exercised and the AMT calculation is killing me.