Am I required to pay estimated taxes on ISOs?
July 12, 2004
Subject: ISO Cashless Options sale & Tax issues
Date: Wed, 02 Jun 2004
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?
Date: Fri, 02 Jul 2004
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.