If you work in tech, chances are your taxes aren’t simple. You’ve got RSUs, ISOs, AMT, ESPPs—maybe even some QSBS. And if you’ve ever used TurboTax to file, you might have that nagging feeling: Did I do this right?
You’re not alone. Every year, we see tech employees unknowingly overpaying or underpaying their taxes because TurboTax doesn’t handle stock compensation well. It’s not that TurboTax is bad software—it’s just that it doesn’t know what it doesn’t know. And when it comes to stock options, missing details can cost you thousands.
So, let’s break it down: Is TurboTax for tech professionals? How does it go wrong? Why does it happen? And what can you do about it?
How Does TurboTax Go Wrong?
Here’s where things start to fall apart:
1. Missing Carryovers (a.k.a. Lost Money)
Let’s say you exercised ISOs last year and paid Alternative Minimum Tax (AMT). That extra tax should turn into a credit you can use in future years—but only if it’s carried over correctly.
If you switch to TurboTax, that credit often disappears unless you manually enter it. And most people don’t even know to look for it. One client came to us after years of using TurboTax and had missed out on a $36,000 AMT credit. That’s not just an “oops.” That’s real money, gone.
2. Double-Reported Income (a Common TurboTax Trap)
This one is frustrating because it’s so easy to miss.
Take RSUs. When your RSUs vest, your employer already includes that income in your W-2. But when you sell those RSUs, the brokerage firm sends you a 1099-B, which might show a $0 cost basis.
TurboTax happily takes that $0 basis at face value. It doesn’t know that your W-2 already accounted for that income. And that’s how people end up paying taxes twice on the same income.
It’s not just RSUs—this happens with ESPPs, ISOs, and NQSOs, too. The numbers don’t automatically match between tax forms, and unless you manually adjust them, you could be overpaying by thousands.
3. Underpaying Taxes (Because You Don’t Know What You Don’t Know)
TurboTax is great if you tell it the right information. But what if you don’t know what to enter?
A classic example: ISOs and AMT.
- If you exercise ISOs but don’t sell them, TurboTax won’t flag that you might owe AMT.
- If you sell ISOs in a disqualifying disposition, TurboTax might not correctly link the income between your W-2 and 1099-B.
Either way, you could be underpaying without realizing it. And if you make over $400K a year? That increases your audit risk.
4. Audit Triggers & IRS Notices
Let’s say you worked at a startup, left for a new job, and forgot to update your address with your old employer. That employer sends out a W-2 for a final stock grant, but you never get it.
TurboTax doesn’t know that W-2 exists. But the IRS does. And now, months later, you get a notice saying you underreported income.
We see this happen all the time—missing forms, unreported stock sales, miscalculated AMT. And once the IRS gets involved, you’re stuck scrambling to figure out what went wrong.
Real-Life Examples: The Stock Compensation Mistakes We See Every Year
If this all sounds a little abstract, let’s make it real. These aren’t just technical tax quirks—these are actual mistakes we see tech employees make every year. And they aren’t small errors either. They can lead to double taxation, IRS notices, or thousands of dollars in overpaid taxes.
Here’s how it happens in practice:
ESPPs: The Disqualifying Disposition Problem
Say you buy shares through your company’s Employee Stock Purchase Plan (ESPP) and sell them less than a year later. That’s called a disqualifying disposition—and it means the gain should be taxed as ordinary income.
Here’s the issue:
- Your 1099-B only reports the purchase price.
- But your W-2 already included the gain as income.
- TurboTax doesn’t automatically connect the two.
If you don’t manually adjust your cost basis, you’ll pay tax on the same gain twice.
ISOs: The AMT Trap
When you exercise ISOs, your employer files a Form 3921 with the IRS. But TurboTax doesn’t always prompt you to report that exercise properly.
If you miss it:
- You might owe AMT but not realize it, leading to underpaid taxes.
- Or you might pay AMT but not carry over the credit, leaving money on the table.
Either way, it’s a mess.
RSUs: The Zero Basis Mistake
- You sell RSUs, and your brokerage reports a $0 cost basis on your 1099-B.
- Your W-2 already included the RSU income when they vested.
- But TurboTax doesn’t know that—so it taxes the full sale price again.
This is one of the most common ways people overpay.
NQSOs: The Missing Wages Issue
Non-Qualified Stock Options (NQSOs) have a similar problem.
- The 1099-B shows the exercise price, but not the income you picked up in wages.
- If you don’t adjust for that, you get taxed twice.
And once again, TurboTax won’t catch it.
So, What Can You Do?
Stock compensation taxes are complicated. And TurboTax? It’s only as good as what you tell it.
We’ve seen people:
- Lose tens of thousands of dollars by missing AMT credits.
- Get IRS notices for misreporting stock sales.
- Overpay by thousands because of incorrect cost basis reporting.
That’s why it’s important to have someone who understands how these forms actually work.
We’re not saying you have to ditch TurboTax forever—but if you have stock options, it might be costing you more than you think.
And if you ever feel like you’re guessing? That’s a sign it’s time to get help.
The KB Financial Advisors Role: Your Headache Solution
So, what’s the alternative? You could spend hours researching tax rules, double-checking forms, and hoping you got everything right—or you could let someone who does this every day handle it for you.
Here’s how we help:
We Actually Understand These Forms
We’ve seen every version of a messed-up 1099-B, W-2, and AMT calculation. We know where TurboTax typically goes wrong and how to fix it before it becomes a problem.
We Have the Experience to Catch Mistakes Before They Cost You
Between our team, we have decades of experience handling stock compensation taxes. Whether it’s AMT, RSU cost basis, or ESPP sales, we’ve seen it all. More importantly, we know what should be happening on your tax return—and we make sure it’s done right.
We’re Not Just Accountants—We’re Part of Your Bigger Financial Picture
The unique thing about our firm is that we don’t just prepare tax returns—we integrate tax planning with financial planning. Your financial advisor and tax manager actually talk to each other, so we’re tracking everything throughout the year. That means:
- You’re not scrambling for forms at tax time.
- If you exercise ISOs or sell RSUs, we already know and plan accordingly.
- We don’t just file your taxes—we help you optimize your tax strategy so you aren’t overpaying.
When It Goes Wrong, It’s Expensive
We get why people use TurboTax. It’s cheaper upfront. But when things go wrong—when you miss an AMT credit, pay tax twice on RSUs, or trigger an IRS notice—it stops being cheap real fast.
We’ve had clients come to us after years of DIY taxes, only to find out they’d overpaid by tens of thousands. One client saved $36,000 in a single year just because we caught a missing AMT credit.
No More Wondering If You Did It Right
The biggest relief for our clients? They don’t have to spend weekends second-guessing their tax return. No more trying to decode IRS instructions, no more wondering if they’ll get a surprise tax bill later.
And if the IRS ever does send a notice about a return we prepared? We handle it. No stress, no back-and-forth—you just forward it to us, and we take care of the rest.
Final Thoughts: Is It Time To Ditch TurboTax?
TurboTax is great for simple tax returns. But if you have RSUs, ISOs, ESPPs, and AMT in the mix? That’s where things go wrong.
The biggest issue isn’t TurboTax itself—it’s that it doesn’t know how to handle the gaps between tax forms. And those gaps can cost you thousands in overpaid taxes, missed credits, or IRS notices.
Our recommendation? If you have stock compensation, make sure you’re filing correctly. Because when it comes to taxes, the biggest mistakes are the ones you don’t even realize you’re making.
And if you’re looking for financial advisors who actually understand stock compensation—and can make sure your taxes are done right the first time—we’re always here to help.
Simply book a quick call using our calendar over on our Contact page to see how we can help.
Until next time!
