Potentially bad indicators.
The tax issue may be real but workarounds include giving you a grant of options exercisable at current fair market value, which gives you the opportunity to get the 1% equity without taking any immediate tax hit (you would have to pay more for the equity at the time of exercise than founders did at the beginning, and your ultimate tax consequences would be more complicated than you would have gotten through a simple early-stage grant of, e.g., restricted stock with an 83(b) filing, but you could still profit significantly in a success case).
Can't comment on your specific situation but, over the years, I have frequently seen "string out" situations where companies used people while never intending to follow through on their promises. Legal remedies in this situation are limited in a practical sense, with fraud being very hard to prove (especially where proving intent to defraud is a requirement and where the written offer letter does not contain the item you claim they represented they would give you) and with such cases often taking a six-figure sum, and a year or more of miserable fighting, to process through to verdict.
On the other hand, many startups are notoriously slow to document things when the founders think of the legal stuff as simply being a process of "papering" things they know they all agree upon.
The important thing here is to push to get the equity grant documented in some form as quickly as possible. This will flush out the company's intentions now, when your risks are less, as opposed to later, when you might be so committed as to be trapped. Tax issues do come up in this context but have never stopped any early-stage deal (in my considerable experience with this issue) where the parties truly desire to implement it.