Tax Strategy For Facebook Stock Holders / Employees

Posted  353 Views updated 1 year ago
Tax Strategy For Facebook Stock Holders / Employees

Are you one of the lucky Facebook employees who received millions in Facebook stocks?  Are you giving away half of your stocks just to pay for taxes? Are you looking for a strategy that can save thousands of dollars in taxes?  Then you need to make an appointment with your CPA as soon as possible.   Time can play a big factor in how much tax you will end up paying.

You may also be aware of Facebook selling some of your shares to cover the tax withholdings.   How much tax should be withheld?  Each situation is unique and Facebook may not be aware of each individual tax status and therefore can not accurately determine how much tax to withhold.  However, this won’t stop them from selling your stocks.

Are you thinking about renouncing your citizenship like  Severin to avoid paying millions in taxes or do you have any other tax strategy in place? Well, if you don’t then you should think about it.   Your CPA should be able to help you come up with one.   In most cases, it is very late to renounce your citizenship but you may have some other options to avoid paying huge taxes.  Moreover,  “There is a  law known as the Reed Amendment which explains that if the Attorney General determines that a U.S. citizen renounced citizenship for the purpose of avoiding tax, the former citizen may be barred from returning to the U.S.” explains Sanjiv Gupta CPA.   You can look at your capital losses to help offset the gains from Facebook stocks., he added.

“I am not going to sell any of my stocks than why do I owe taxes ?,” ask Facebook employee aka 21st-century millionaire.

As a Facebook employee, you received restricted stock units, or RSUs, that don’t turn into actual stock until there is what is defined as a liquidity event.  Liquidity event is a taxable event and  Facebook IPO is one such event.  In other words, you now owe taxes.  Sanjiv Gupta explains that the IRS considers income from stocks as regular compensations and should be taxed as any other regular income you may earn.

In other words -Income from RSU turned stocks is not taxed as long-term capital gain tax. Instead, they will be taxed as your regular income based upon your tax bracket.   You will be taxed both California Tax and Federal tax.

Just in California State Tax, you will pay about 9.3% plus a 1% surcharge if your net taxable income is over 1 million dollars.  Now add your federal income tax bracket on top of this and you may be close to 50% in taxes alone.

That is lots of taxes.   Grab your phone and set up an appointment with your CPA to discuss your situation.  You can also consult with Sanjiv Gupta by calling 510-825-7563.

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