Thousands of technology workers are facing huge tax bills by Monday's income tax filing deadline because of company stock they purchased last year that has since plummeted in value. Accountants and politicians from Silicon Valley to Boston say they have been inundated with horror stories about shares purchased with employee options that workers once had hoped would make them rich. Instead, the shares saddled them with big tax bills on profit they never saw. Many of these workers now owe far more in taxes than their stock is worth. Former Cisco engineer Jeffrey Chou, 32, owes $2.5 million in taxes on company stock he purchased last year that has since withered in value. Chou figures that if he were to sell everything he owns, including the three-bedroom townhouse that he shares with his wife and 8-month-old daughter, the family still could not pay the bill. Chou used incentive options to buy, in one transaction, about 100,000 Cisco shares in March 2000, paying 5 cents to 10 cents a share. At the time, Cisco shares were trading for $62 to $63 each. The difference between the price he paid and what the shares were worth--a total of about $7 million--is taxable to him as profit. Chou could sell his shares now, but it wouldn't solve his problem. Cisco closed Thursday at $17.98, which means that his entire stake is worth about $1.8 million. To pay his state and federal tax bills, he needs $700,000 more.
An experiment in weblogging by the Yantis' of Temecula.
Things we find interesting. Items including (but not limited to) Temecula, the Yantis family, literature, technology, science, computers, the Internet, horses, and teaching. Items will be added to this weblog as we find them. With luck and time there will be new things to read about every day, so check back with us frequently. Posts not currently on the main page are available in the archive. Established December 6, 1999
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