Quote:
Originally Posted by goofyballer
Anyone know what kind of person (accountant? probably a specialty one of some kind?) I should look for to talk to about what kind of tax hit I'd take for exercising my options?
My experience has been that tax accountants will be pretty expensive and/or generally not that useful in that often it seems basic research you do makes you more knowledgeable. This stuff is generally pretty well documented and you can research a lot yourself. Assuming you're American - the first thing you want to do is confirm they're "incentive stock options" (ISO). Given the amount you mentioned it's very likely they are - but you can have the company confirm that to you.
If they're ISOs the most likely situation you're in is that you wouldn't own any taxes upon exercising (assuming that the company isn't liquid). Then when you sell your shares you pay tax on the difference between the sale price and the exercise price. The amount you pay depends on some factors like how long you've held the shares / when you were granted the options. You can google that, but its something like holding the shares for 1 year gets you capital gains treatment (what you want).
The one caveat to this is the AMT. I don't know the details there, but basically if the difference between your exercise amount and the current fair market value for tax purposes (the company can tell you this number) exceeds some threshold you owe some tax right away. If you think this is something that would affect you - its probably worth it finding a tax accountant.
Quote:
Originally Posted by goofyballer
I feel like, for the cost of the strike price on my options, I might take a flier on them (like, $20-$30k, something like that) on the chance they wind up being worth 10x that in a liquidity event - but if I took a significant tax hit based on the theoretical but unrealized value (like, $100k?) and would be unable to recoup that in any way if they wound up being worth $0, no thanks.
Also willing to hear arguments that I'm an idiot for even considering this.
This is so dependent on your situation. If the money doesn't represent a significant portion of your savings/net worth, you won't trigger AMT, and you think the company legitimately has potential - I'd say do it. You start to change any of those parameters and it obviously becomes much more of a personal decision.
I'd try to talk to a couple of people you trust that have left the company and ask what they did. You can also ask some people you trust that are at a higher level and might have a better idea of future potential of the company. It's still a personal decision, but at least those people understand some of the factors much better than non-involved people.
Edit: Also, if you go the route of using an accountant, ask people at your company or people that have left who they used. It's way better than finding someone yourself. If you're stuck finding one yourself its worth asking how often they've dealt with tech employees / companies. If you're in Silicon Valley, I bet every tax accountant has lots of experience and getting advice might be super cheap. If you're in the middle of nowhere, you probably need to be more careful.