In general, employees have little control over the base salary received from employment - Other than, of course, the hope that it goes up each year due to your outstanding job Performance. If an individual is in a bonus program, the timing of receipt of any earned Bonuses sometimes can be controlled. If an individual has received stock options, the timing of the income recognized from stock option exercises obviously is controllable.

Bonuses

If an employer allows its employees to defer the payment of a bonus that means it can be recognized in the current year or in some future year. Before making this decision, AMT taxpayers need to make a determination of the impact of this choice on the AMT. As was discussed above, the more ordinary income an AMT taxpayer has, such as from salaries and bonuses, the more he or she will be pulling away from the AMT.

Stock options

If stock options are ordinary, or "nonqualified" stock options, an employee will have ordinary income that will be reported in the W-2 whenever such option is exercised (non-employee independent contractors with options will have the income reported on their 1099). This timing is entirely up to the individual. Stock option exercises could possibly be a large enough item, in proportion to other income, to eliminate the AMT. When doing this, individuals must also be sure to take into account any state income taxes that will be withheld, along with the Federal income taxes, at the time of the exercise. Because state income taxes are not deductible for the AMT, this will offset somewhat the AMT benefit from increasing ordinary income with a stock option exercise.

If stock options are "qualified" options, also known as incentive stock options ("ISO"), exercising and holding will result only in paying more AMT, for taxpayers already in the AMT. For Regular Tax purposes, there is no income at the time of exercising an ISO so long as the holding period requirements are met. In the future when the stock is sold, the taxpayer recognizes long-term capital gain instead of ordinary income. If the holding period is not met however, at the time of sale of the stock you would have ordinary income, effectively converting the option to a nonqualified option with the results as described above. The key to managing ISO exercises is to do them in a year when the taxpayer has enough other ordinary income to "absorb" the AMT effect. Many ISO holders accomplish this by spreading out over multiple years the exercise of their ISOs.

Commissions

Some employees receive commissions in addition to their base compensation. Contingent income like this should be evaluated to see if there is any control over its timing, which then can be used in AMT planning as has been discussed above.