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Subject:   ISO Cashless Options sale & Tax issues
Date:   Wed, 02 Jun 2004
From:   Rhett

Hi Michael,

I exercised some incentive stock options and the company withheld no taxes from my cashless exercise. Am I required to pay estimated taxes? Will I owe AMT?

Sincerely,
Rhett

Answer

Date:   Fri, 02 Jul 2004

Hello Rhett,

I recommend that you meet with a tax advisor to compute your individual tax amounts. Remember that no penalty will apply for underpayment of estimated tax provided you pay through your withholding at least the tax on last year's income tax return, or 110% of the tax on last year's income tax return if your adjusted gross income for last year was more than $150,000. Federal estimated tax payments are made using Form 1040ES. You can get the forms at the IRS web site, http://www.irs.gov. California estimated tax payments are made using Form 540ES. You can get those forms at the FTB web site, http://www.ftb.ca.gov.

Good luck!

Mike Gray

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

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.