Michael Gray, CPA’s Option Alert #116

An irregular alert for issues relating to employee stock options

September 11, 2013
© 2013 by Michael Gray, CPA
ISSN 1931-2768

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

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The year is two thirds over

Now that school has started, the year will be roaring to a close. Will you be ready?

With many tax changes this year, especially for taxpayers with high incomes or high net worths, now is a good time for income and estate tax planning. To make an appointment, call Dawn Siemer Mondays, Wednesdays or Fridays from 9 a.m. to 5 p.m. at (408) 918-3162.

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Extension season is here.

There are only about one and a half months left to finish 2012 individual income tax returns (extended due date October 15) and only about two weeks left to finish 2012 calendar year business tax returns (extended due date September 16). If you would like us to prepare your extended 2012 income tax returns, please call Dawn Siemer Mondays, Wednesdays or Fridays from 9 a.m. to 5 p.m. at (408) 918-3162. Be aware that our time for personal meetings will be very limited.

We can also prepare amended income tax returns to clean up tax returns that were previously filed.

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Third quarter estimated tax payment date approaches

The federal estimated tax payment for the third quarter is due September 16. If you are making your payments based on this year’s tax information, it’s time to get in touch with your tax advisor. California doesn’t have a third quarter payment for individuals, because the payments for the first two quarters are “front loaded.”

However, some taxpayers subject to California tax may find they will be over the $1 million threshold where their estimated tax payments can’t be based on last year’s income tax returns. They might have to deposit a make-up payment on September 16 to avoid late payment penalties.

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Are you leaving your employer or is your employer being acquired?

When you leave your employer, stock options may lapse or the status of an option can change from being an incentive stock option to being a nonqualified stock option. If you exercise an option in a company for which the stock isn’t publicly traded, you can have a big tax bill without having the cash to pay it.

When a non-publicly traded company is acquired, there is often a “liquidity event,” enabling an employee to cash in options for stock that previously couldn’t be sold.

These are both events where a tax advisor who understands stock options can sometimes help reduce the tax bill, but more importantly can help avoid surprises for unplanned tax bills.

Even when income taxes are withheld, additional tax can still be due on April 15.

We can help! To make an appointment, call Dawn Siemer at 408- 918-3162 on Mondays, Wednesdays and Fridays from 9 am. to 5 p.m. Pacific Time.

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IRS provides guidance for same-sex spouses

In response to the Supreme Court’s Windsor decision, the IRS has issued Revenue Ruling 2013-17 with guidance for same-sex married couples and registered domestic partners.

The IRS has ruled that same sex couples who are legally married in foreign or domestic jurisdictions shall be considered married for federal income tax purposes, even if they live in a state that doesn’t recognize such unions. This ruling follows a previous ruling in Revenue Ruling 58-66 that couples who had a common law marriage and moved to a state that didn’t recognize such marriages are still considered married for federal income tax purposes.

The rule also applies for the eligibility for employee benefits under the federal tax laws, such as the exclusion for employer-provided employee medical insurance covering a spouse.

“Husband” and “wife” will be interpreted to include a same sex spouse.

Registered domestic partners, civil unions or other similar formal relationships recognized under state laws that are not denominated as a marriage under that state’s law are not considered to be marriages under the federal tax laws. (Some states recognize these relationships as marriages. Consult with legal counsel for the applicable state.)

The ruling is effective September 16, 2013, but taxpayers have the option to apply it sooner, including filing amended income tax returns for years for which the statute of limitations hasn’t expired.

Because of the September 16, 2013 effective date, same sex married couples can still file as single taxpayers up to that date – last chance! Consider consulting with a tax advisor to find out which status results in a lower tax bill, but good ones are hard to meet right now because of the September 16 deadline for estimated tax and extended due date for business income tax returns.

(Revenue Ruling 2013-17, August 29, 2013.)

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Community public access television needs our help

As you can see below, 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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New time and stations for Financial Insider Weekly in Santa Cruz County, Watsonville and Capitola.

The broadcast time in Santa Cruz County, Watsonville and Capitola has changed to 6 p.m. on Wednesdays and 2 p.m. on Fridays. The program is now broadcast on Comcast Channel 26 in Santa Cruz County and on Charter Communications Channel 72 in Watsonville and Capitola.

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Financial Insider Weekly broadcast schedule for September and October.

Financial Insider Weekly is broadcast in San Jose and Campbell on Fridays at 9:30 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 September and October:

September 13, 2013, attorney Naomi Comfort, Silicon Valley Elder Law, PC, “Retirement and long-term care planning”
September 20, 2013, attorney Ray Sheffield, “Estate planning for retirement benefits”
September 27, 2013, Richard Lambie, professional fiduciary, “Selection and compensation of a professional fiduciary”
October 4, 2013, attorney Robert E. Temmerman, Jr., Temmerman, Cilley & Kohlmann, LLP, “I’m an executor! Now what?”
October 11, 2013, attorney Robert E. Temmerman, Jr., Temmerman, Cilley & Kohlmann, LLP, “I’m a trustee! Now what?”
October 18, 2013, James Brown, ASA, CFP®, Perisho, Tombor, Brown CPAs, “The role of a business valuation specialist”
October 25, 2013, attorney Naomi Comfort, Silicon Valley Elder Law, PC, “Special needs trusts”

Financial Insider Weekly is also broadcast as follows:

  • Monday at 1:30 p.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
  • Monday at 4:00 p.m. and 7:00 p.m. Pacific Time on cable channel 19 in Morgan Hill and broadcast on the internet at the same time as streaming video at www.mhat.tv
  • Mondays at 6:30 p.m. on Midpeninsula Media Center, Comcast Channel 28 in Palo Alto, East Palo Alto, Stanford, Menlo Park & Atherton
  • Monday at 7:30 p.m. on Comcast channel 15 in Saratoga
  • Tuesdays at 2:30 a.m. and 12:30 p.m. on Midpeninsula Media Center, Comcast Channel 28 in Palo Alto, East Palo Alto, Stanford, Menlo Park & Atherton
  • Tuesday at 4:00 p.m. and 7:00 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

  • Wednesdays at 6:00 p.m. on Comcast channel 26 in Santa Cruz County and on Charter Communications Channel 72 in Watsonville and Capitola
  • Wednesday 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
  • Fridays at 2 p.m. on Comcast channel 26 in Santa Cruz County and on Charter Communications Channel 72 in Watsonville and Capitola
  • Friday at 1:30 p.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
  • Friday at 3:30 p.m. on KCAT, Comcast channel 15 in Los Gatos
  • Friday at 4:00 p.m. on KMTV cable channel 15 in Cupertino, Los Altos and Mountain View
  • 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 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
  • Saturdays at 1 p.m. on Comcast channel 26 and AT&T U-verse channel 99 in Marin County

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 personally answer email questions. He will answer selected questions in this newsletter.

For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.

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Follow me on social media!

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, www.linkedin.com/in/michaelgraycpa, and Google+.

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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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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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