Michael Gray, CPA’s Option Alert #104

An irregular alert for issues relating to employee stock options

September 4, 2012
© 2012 by Michael Gray, CPA
ISSN 1931-2768

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

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Tax planning thoughts.

There are some tax plans that take time to implement, such as setting up a family limited partnership to hold private company stock or making a gift of stock to a charitable remainder trust. Doing both of these may require having an appraisal done, which is time consuming. Now is the time to discuss what actions might be appropriate before the end of 2012.

This is the most difficult year for tax planning that I can remember. I have never seen so many changes that will happen if Congress doesn’t take action, and I can’t imagine that not happening. Nobody knows what the final answers will be, most of which may not be enacted until late next year.

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Third quarter, 2012 estimated tax payment due date is September 17.

The next federal estimated tax payment for individuals and calendar-year corporations is September 17. In most cases, California doesn’t require an estimated tax payment for September 17 because the first two estimated tax payments are front-loaded.

If your estimated tax payments aren’t based on last year’s income tax returns, you should be working with your tax advisor to annualize your tax liability.

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It’s time for working on amended, extended and late income tax returns.

It’s time to have a second look at income tax returns that were filed for possible amended income tax returns. Taxpayers who filed extensions are also looking for help getting their income tax returns done.

If you would like our help, call Michele Brantley on Wednesdays from 8:30 a.m. to 5:30 p.m. Pacific Time to make an appointment. Michele’s telephone number is 408-918-3162.

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New book about investing using Roths and IRAs to be released this month.

How to use Roth and IRA accounts to provide a secure retirement, – 2012 Edition by Michael Gray, CPA will be released this month. For the month of September, 2012, you can buy it for half price – $14.99, plus shipping and handling and applicable California sales tax. Click here to order. The book is 76 pages, and is packed with insights, including Roth Conversions, a comparison of Roth to regular IRA accounts, self-directed accounts, alternative investments, prohibited transactions, when Roth and IRAs pay income taxes and much more.

You can also get a Kindle version of the book at Amazon.com. Search “How to use Roth and IRA accounts”. Eventually a Nook version of the book will be listed at bn.com.

After you read the book, please post a book review at Amazon.com and bn.com.

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Introductory offer extended for employee stock options book

Our half-price offer for Employee Stock Options – Executive Tax Planning, 2012 Edition expires September 15, 2012. Click here to order or to order by telephone, call Michele Brantley at 408-918-3162.

You can also get a Kindle version of the book at Amazon.com. Search “Employee Stock Options Executive Tax Planning”. Eventually a Nook version of the book will be listed at bn.com.

After you read the book, please post a book review at Amazon.com and bn.com.

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IRS official says pre-approved plan may be developed for ESOPs.

An ESOP or Employee Stock Ownership Plan is a type of retirement plan that principally holds employer stock.

The IRS has a huge backlog processing approvals for these plans because under the current rules, all ESOPs must be individually designed.

Donald Kieffer, who is the area manager for the IRS Plans Determination Letter Program in Mountainside, N.J,. recently said in a webcast on August 23 sponsored by the American Society of Pension Professionals & Actuaries in Arlington, Virginia, “We’re in discussions with the community for using pre-approved ESOP plans and will see them eventually.”

Mr. Kiefer said cash balance (hybrid) plans can’t be included in a pre-approval program until the IRS issues final regulations under Internal Revenue Code Section 411(d) (special rules for minimum vesting standards.

The IRS is aware of the processing delays for ESOPs and there is some hope of breaking the logjam in the future.

(CCH Federal Tax Day, “IRS May Develop Pre-Approved Program for ESOP Plans, Official Says”, August 24, 2012.)

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Should you consider selling stock to report long-term capital gains in 2012?

We probably won’t know what the tax laws for 2012 will be until after the end of 2012. Currently, the maximum long-term capital gains rate is scheduled to increase from 15% to 20%. High-income taxpayers are scheduled to be subject to a 3.8% Medicare tax on “investment income”, including long-term capital gains, starting in 2013. So the maximum federal income tax rate for long-term capital gains may increased from 15% to 23.8% — a 58.7% increase! See this article for more details. http://www.taxtrimmers.com/capital-gains.shtml

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Refundable minimum tax credit expires after 2012.

The minimum tax credit was made refundable for a limited time to help employees who suffered from market declines after exercising incentive stock options. The refundable minimum tax credit expires after 2012. Since there is a three-year waiting period before you can claim it, the last year in which an alternative minimum tax was incurred for which a refundable minimum tax credit may be claimed is 2008.

See this article for more details. http://www.stockoptionadvisors.com/refund

The structure of the alternative minimum tax system is for the alternative minimum tax to be a prepayment of tax, but it works very imperfectly.

Please write or call your representatives in Congress to extend this important tax relief.

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Community public access television needs our help.

Public access television is a vital part of our educational outreach to various communities. These are usually nonprofit, charitable organizations, like public television stations. Unlike those stations, most of the programming for the public access stations comes from local producers.

This programming includes the local arts, productions by students at local schools, community outreach by churches, independent local producers discussing current social issues, educational programming by local providers like ourselves and much more. In other words, public access television makes a unique, important contribution to the communities it serves.

With the difficult times we are experiencing, many public access stations are facing severe financial challenges, and might not survive without more community financial support. I urge you to consider making a donation to your local public access television station. Here is a link for a list of public access television stations in California: http://www.communitymedia.se/cat/linksca.htm.

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Financial Insider Weekly broadcast schedule for July and August.

Financial Insider Weekly is broadcast in San Jose and Campbell on Fridays at 8:00 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 July and August:

July 6, 2012, David Howard, attorney, Hoge, Fenton Jones & Appel, “Information reporting requirements for foreign bank accounts and foreign trusts”
July 13, 2012, James Brown, ASA, CFP®, Perisho, Tombor, Ramirez, Filler & Brown, PC, “The role of the business valuation specialist”
July 20, 2012, Dean Fabro, Bank of the West, “Small Business Financing”
July 27, 2012, Francis Doyle, attorney, WealthPLAN, “Preserving family assets using a family limited partnership or LLC”
August 3, 2012, Judy Barber, Family Money Consultants, LLC, “The transfer of family wealth to the next generation: What’s the money for?”
August 10, 2012, Judy Barber, Family Money Consultants, LLC, “Raising money-smart kids in the midst of affluence”
August 24, 2012, Gregory Carpenter, BTI Group Merges & Acquisitions, “How to buy a business”
August 31, 2012, Gregory Carpenter, BTI Group Merges & Acquisitions, “Preparing to sell a business”

Financial Insider Weekly is also broadcast as follows:

  • Sunday at 5:30 a.m. on Comcast Channel 27 in Santa Cruz County and on Charter Communications Channel 73 in Watsonville and Capitola
  • Monday at 1:30 p.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
  • Monday at 3:30 p.m.on Comcast Channel 27 in Santa Cruz County and on Charter Communications Channel 73 in Watsonville and Capitola
  • Monday at 4 p.m. and 7 p.m. Pacific Time on cable channel 19 in Morgan Hill. Broadcast on the internet at the same time as streaming video at www.mhat.tv
  • Monday at 7:30 p.m. on Comcast channel 15 in Saratoga
  • Tuesday at 4 p.m. and 7 p.m. Pacific Time on cable channel 19 in Morgan Hill. Broadcast on the internet at the same time as streaming video at www.mhat.tv
  • Tuesday at 9:00 p.m. on Comcast channel 26 and AT&T U-verse channel 99 in Marin County
  • Wednesday at 8 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
  • Thursday at 5:30 p.m. on Comcast channel 27 in Santa Cruz County and Charter Communications channel 73 in Capitola and Watsonville
  • Friday at 1:30 p.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
  • 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”
  • Friday at 8:00 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
  • Saturdays at 12:30 p.m. on Comcast channel 27 in Santa Cruz County and on Charter Communications Channel 73 in Watsonville and Capitola
  • Saturdays at 9:00 a.m. and 6:00 p.m. on Midpeninsula Media Center, Comcast Channel 28 in Palo Alto, East Palo Alto, Stanford, Menlo Park & Atherton

Past episodes of Financial Insider Weekly are posted on YouTube. One way to watch them is to go to our web site, www.financialinsiderweekly.com, and click on “Past Episodes.”

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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See our free report, “Nonqualifed Stock Options – Executive Tax and Financial Planning Strategies” at http://www.stockoptionadvisors.com/isofaq/non-q_stock/

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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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