Michael Gray, CPA’s Option Alert #92

An irregular alert for issues relating to employee stock options

June 17, 2011
© 2011 by Michael Gray, CPA
ISSN 1931-2768

(If you find this information valuable, please pass it on to a colleague!)

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Do you need help with finishing extended income tax returns, preparing amended income tax returns, or tax audits?

Now that April 18 has passed, it’s time to focus on finishing extended income tax returns. Some of our readers have found errors in or are uncomfortable with tax returns that they prepared using tax software or were prepared by other tax return preparation companies. We can provide a second opinion. Others have received notices for tax audits and sometimes can’t get the help they need from their tax return preparer. We can help with all of these. To make an appointment, call Dawn Siemer Mondays, Wednesdays or Fridays at 408-918-3162 from 9 a.m. to 5 p.m.

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Need help for upcoming IPO, acquisition, or leaving employer?

The stock market has returned to life. We are seeing a number of employees who want planning help for their employee stock options relating to a coming initial public offering, acquisition of their employer or leaving their employer. May we be of service to you for planning for these events? To make an appointment, call Dawn Siemer Mondays, Wednesdays or Fridays at 408-918-3162 from 9 a.m. to 5 p.m.

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California conformity could be a “pumpkin”

Former California Governor Shwartzenegger approved SB 401, enacting conformity of California tax laws to many federal tax law changes of the past few years. Under Proposition 26, SB 401 will be repealed unless it is reenacted by a two-thirds vote of the Legislature before November 3, 2011. With the current political climate in Sacramento, the odds don’t look good. Be aware that all California estimated tax computations may be wrong for 2011 forward.

(Spidell’s California Taxletter, June 1, 2011.)

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Annual reports for foreign accounts and trusts and receipt of foreign gifts due

Each year, a report must be filed for foreign bank and brokerage accounts owned by US residents and citizens for which US residents and citizens have signature authority. The form for accounts is TD F 90-22.1, Report of Foreign Bank and Financial Accounts. The forms for trusts are Forms 3520 and 3520-A, Annual Report of Transactions with Foreign Trusts and Receipt of Foreign Gifts, and Annual Information Return of a Foreign Trust With A U.S. Owner. You can get the forms at www.irs.gov.

The foreign bank account return is due June 30 for the previous year. The penalties for failure to file can be onerous, starting at $10,000. Congress and the IRS are giving a lot of attention to this area, including requiring reporting by foreign banks. Don’t think you can “skate by.”

The foreign trust and gift form is due on the due date of your individual income tax return, including extensions.

If you have a question about whether you are subject to these reporting requirements, see a tax consultant immediately.

The IRS has a Voluntary Compliance Initiative to catch up on unfiled back reports and unreported income from foreign accounts. The paperwork has to be submitted no later than August 31, 2011. The benefits of complying include reduced penalties and avoiding criminal prosecution. If you are wondering if you should use the procedure, consult with a tax advisor who knows about it.

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IRS asks for comments about intercompany accounting for employee stock options

The IRS has issued a request for comments on its proposed regulations for the allocation of deductions for compensatory stock options under Section 482. (Cost sharing arrangements under the comparable profits method.) The Regulation Project Number is REG-106359-02 (T.D. 8989). These regulations principally relate to transfer pricing between domestic corporations and related offshore corporations.

Comments should be received by the IRS no later than July 30, 2011. The address to send comments is Yvette B. Lawrence, Internal Revenue Service, Room 129, 1111 Constitution Avenue NW, Washington, DC 20224.

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Financial Insider Weekly broadcast time changed for Marin County

The broadcast time and day for Marin County has been changed to Tuesday at 9 p.m. The show is broadcast on Comcast Channel 26 and AT&T U-verse Channel 99 for Marin County.

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Financial Insider Weekly broadcast schedule for June and July

Financial Insider Weekly is broadcast in San Jose and Campbell on Wednesdays at 7:00 p.m., Pacific Time. You can watch it on Comcast channel 15 for San Jose and Campbell. The show is broadcast as streaming video at the same time at www.creatvsj.org.

Here are the scheduled interviews for the rest of June and July:

June 22, Greg Carpenter, BTI Group Mergers & Acquisitions, “How to buy a business”
June 29, David Howard, Attorney, Hoge, Fenton, Jones & Appel, “Reporting requirements for foreign bank and investment accounts”
July 6, Karl-Heinz Lachnit, Attorney, Silicon Valley Law Group, “Choices of forms for operating a business”
July 13, Jeffrey B. Hare, Attorney, APC, “Using a checkbook LLC to invest IRA and Roth funds”
July 20, James V. Quillinan, Attorney, Hopkins & Carley, “Tax planning for real estate change of ownership in California”
July 27, James V. Quillinan, Attorney, Hopkins & Carley, “Estate planning with temporary changes for 2011 and 2012”

Financial Insider Weekly is also broadcast as follows:

  • Sunday at 5 p.m. on Comcast channel 28 in Hayward, Alameda and Fremont and on AT&T U-Verse Channel 99, Hayward public access TV 28 in California
  • Monday at 7:30 p.m. on Comcast channel 15 in Saratoga
  • Thursday at 5:30 p.m. on Comcast channel 27 in Santa Cruz County and Charter Communications channel 73 in Capitola and Watsonville
  • Thursday at 7 p.m. on Comcast channel 26 and AT&T U-verse channel 99 in Marin County
  • Thursday at 10 p.m. on Comcast channel 28 in Hayward, Alameda and Fremont and on AT&T U-Verse Channel 99, Hayward public access TV 28 in California
  • Friday at 4 p.m. on cable channel 15 in Cupertino, Los Altos and Mountain View
  • Friday at 4:30 p.m. on Comcast channel 15 in Los Gatos
  • Friday at 6:00 p.m. on Comcast and Astound channel 29 in San Francisco. Online streaming video at www.bavc.org, “public access TV”.

Past episodes are available at https://www.youtube.com/user/financialinsiderweek.

Let me know any ideas that you have for topics or guests. Guests will usually have to be located in or near the Silicon Valley in California.

Hope you can watch or record the show. Please tell your friends about it!

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Michael Gray regrets he can no longer answer emails personally. He will answer selected questions in this newsletter. Email your questions to mgray@stockoptionadvisors.com.

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Follow me on Twitter, Facebook or LinkedIn!

If you enjoy Twitter, please follow me at twitter.com/michaelgraycpa. I would especially appreciate retweets of our messages announcing episodes of Financial Insider Weekly.

I’m also on Facebook and Linked In. You can also follow me on other social media sites, www.facebook.com and www.linkedin.com/in/michaelgraycpa.

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Check out my blog.

I have also started a blog at michaelgraycpa.com. Check it out!

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Do you know about our other newsletters?

For general tax developments, tax planning ideas, business development ideas and book reviews, subscribe to Michael Gray, CPA’s Tax & Business Insight.

We are now offering our real estate tax newsletter, Michael Gray, CPA’s Real Estate Tax Letter, free of charge. Like this newsletter, we will talk about new developments, have reports on special tax concerns, and answer questions and answers. To subscribe and read a sample issue, visit realestatetaxletter.com.

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IRS Circular 230 Disclosure:

As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this communication was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

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Consult with a tax advisor

For our readers who aren’t tax advisors, this newsletter is intended to alert you about tax issues that could affect you. It is not a substitute for advice from a professional tax advisor. You will find that getting advice from a qualified advisor is a worthwhile investment.

Tax advisors should view the newsletter as an alert to become aware of issues relating to employee stock options for further research and study.

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Subscribe to Michael Gray, CPA’s Option Alert!

To receive the next issue of Michael Gray, CPA’s Option Alert with more employee stock option tax developments and answers to questions from our readers automatically via email, subscribe by filling out the form below.

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(Michael Gray is the author of Secrets of Tax Planning For Employee Stock Options, Stock Grants and ESOPs.)

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