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They are not paying the 20%. They will pay the interest on the 20%, and will pay up to $500 for amending our taxes. But what I'm seeing online leads to me to believe it is more their fault than mine, and they should pay it. Do you think if we pushed them they would pay it?

No. The 20% should have been withheld from your compensation in the first place, so there isn't really a reason that they should pay the 20%. Their mistake was in not withholding the 20% from your compensation, or from the exercise of the options itself by forcibly selling some of the stock, and in not providing you with a correct W-2. They are offering to correct their mistakes by paying the interest (and hopefully any penalties) and paying to re-do your taxes. Seems reasonable to me.

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