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5 Tax Return Mistakes to Avoid in 2012 – Part 2

5 Tax Return Mistakes to Avoid in 2012 – Part 2

 

Photo Credit: Images_of_Money

Many questions may arise when filing your taxes. In the previous part of this blog series we discussed three commonly made tax return mistakes. In this part, we’ll outline two more mistakes and what you can do to avoid them.

Mistake No. 4: Neglecting To Carry Forward Your AMT Credit

The AMT is basically a pre-payment of the tax on ISOs. IRS Form 6251 is used to figure the amount of your AMT. Although it may take longer than you like to recover the money you paid, you get a credit for AMT in subsequent years. Traditionally, the credit each year is limited to the amount by which your ordinary income tax exceeds your AMT, and any unused credit is carried forward.

Don’t forget about a previous year’s adjustment for AMT and fail to carry credits forward to use in years when their regular income exceeds AMT income. To avoid this error, look at your past taxes and see whether you had any AMT credit eligible to be carried over into this year.

Mistake No. 5: Inadvertently Overpaying AMT In The Year Of An ISO Sale

The tax rules that apply to selling ISO shares after paying AMT can confuse even tax experts. Once you have AMT for your ISO stock, you will need to keep two sets of records: one for ordinary income tax and the other for ongoing AMT calculations. You must do this to properly use the credit to reduce future taxes. This amount is the difference between your regular income tax and AMT capital gains. But in some situations when you are selling the stock at an AMT loss, this negative amount could be restricted by the $3,000 annual limitation on capital losses.

Filing your tax return can be confusing. These are just five of the most commonly made mistakes to avoid while filing. If you need help filing your tax return, contact us today.

Stock Connections specializes in working with San Francisco Bay Area companies that are involved in mergers & acquisitions, are raising capital, or creating stock option or other equity plans. We help start-up, private and public firms become – and remain – SEC-compliant. Stock Connections’ services are designed to help both start-ups and established firms comply with SEC and other regulations in their equity compensation programs. If you or anyone you know is looking to get involved with any of the above, we encourage you to contact us today!

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