I exercised an ISO grant in 2020 and 2021. I was subject to the AMT because the stocks had a bargain price different from the full market value.
I couldn't legally sell the stock until several months after the IPO, and in that time the company went bankrupt and the stock is worthless. Good times! Where in TurboTax should I enter this information? Can I get any money back considering I paid taxes on income that was never earned? And lastly, is there anything special I can claim as a loss beyond the $3,000/year investment write-off, considering the stock hasn't just tanked but vanished?
Thank you so much for any and all advice.
This is a complicated topic and it would be easy to make a mistake! My son had stock options and I caught it when he got audited and had to do an in person audit. However, he had actually paid too much tax and they gave him a refund--and he passed the audit!
So you might want to consult an accountant, especially if the numbers are big.
But basically, you have a basis in the stock*, so when it became worthless you suffered a loss. *We can assume this to be the case because you say you've already paid tax on the stock (as part of your compensation,) although you could be mistaken.
Therefore, when the stock became worthless, you suffered a specific capital loss. You are right that capital losses are limited to $3000 more than capital gains, but the remainder can be carried forward into future tax years. If you do have a very big loss waiting to be deducted in future years, you can earn capital gains without paying taxes--a nice situation although it came at a horrendous cost.
However, remember that your actual loss is not based on what the stock was initially valued at, but rather the amount you actually paid for it, so that is the part you want to be sure you calculate correctly. (Since it was a total loss, you don't have to worry to much about calculating the amount you sold it for! :( )