What are employers’ reporting requirements, and is AMT “prepayment” long?

December 10, 1998

Subject:   ISO Question
Date:   Wed, 03 Nov 1999
From:   Ralph

A couple of questions regarding incentive stock options:

  1. What are the employer’s reporting requirements to the IRS? Is there a 1099 or some other report that states the AMT preference amount? Is the ISO preference strictly reported by the taxpayer on an honor basis (like donations, etc.)?
  2. If you are a buy and hold type of investor I guess this AMT “prepayment” could be a pretty long prepayment? Especially if you are getting more ISOs every year and exercising some every year, it sounds like your AMT will always be exceeding your regular tax.

Thanks.

Answer

Hello Ralph,

Question 1 – There is no employer reporting requirement relating to the exercise of an incentive stock option (unless there is an early disposition – added to W-2.)

Question 2 – You are right. Many executives who continuously receive incentive stock options are perpetually subject to the AMT.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options – Executive Tax and Financial Planning Strategies.

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