Michael Gray, CPA’s Option Alert #124

An irregular alert for issues relating to employee stock options

June 6, 2014
© 2014 by Michael Gray, CPA
ISSN 1931-2768

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

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Pre-publication offer for Secrets of Tax Planning For Employee Stock Options, 2014 Edition.

I just finished an update of my book, Secrets of Tax Planning For Employee Stock Options, 2014 Edition. You can get a copy for half price if you order it by July 10, 2014. You can request information or call your order to Dawn Siemer Mondays, Wednesdays or Fridays at 408-918-3162, or here is a web page with some details http://www.siliconvalleypublishingcompany.com/products/secrets-of-tax-planning-for-employee-stock-options-2014-edition/.

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Second quarter 2014 estimated tax payment is due June 16.

The second 2014 estimated tax payment for individuals and calendar year corporations, estates and trusts is June 16. California requires some taxpayers to make estimated tax payments electronically, generally using Web Pay at www.ftb.ca.gov. The IRS also requires that businesses make their payments electronically, generally at www.eftps.gov.

Remember that California individuals who have gross income exceeding $1 million must compute their estimated tax based on current year taxable income.

The good news is the interest rates used to compute the penalties for underpayment of estimated tax are currently very low, so the penalty shouldn’t be onerous if you do underpay the estimated tax.

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Foreign account report is due June 30.

The annual Foreign Bank Account Report (FBAR), FinCEN Form 114, for 2013 is due June 30, 2014. This is a new Form number to replace old TD F 90-22.1, but the information requested is basically the same. THE FORM MUST NOW BE EFILED, NOT MAILED. The form is required for foreign bank and brokerage accounts either owned by a U.S. citizen or resident or over which a U.S. citizen or resident has signature authority. It also can apply to foreign financial accounts such as life insurance policies that have cash surrender values. The report is required when the total balances for the accounts equal or exceed $10,000. This is a separate report from your income tax return, and no extension of time to file is allowed. The penalties for failure to report are severe, and the IRS is on the war path about enforcing this reporting requirement, even though no tax may be involved.

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Michael Gray will be out of the office part of June.

Michael Gray will be out of the office for a conference from June 11 through June 13. Make your appointment now.

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Do you need help with your extended 2013 income tax returns?

The extended due date for calendar year business income tax returns is September 15 and the extended due date for calendar year individual income tax returns is October 15. We are already hard at work for these tax returns for many of our clients and we would welcome more. May we be of service with your extended returns? Call Dawn Siemer at 408-918-3162 on Mondays, Wednesdays or Fridays to make an appointment.

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Do you need help with amended income tax returns?

We have already been meeting with folks who want a second look at their 2013 income tax returns for possible corrections. Call Dawn Siemer at 408-918-3162 on Mondays, Wednesdays or Fridays to make an appointment.

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The earlier you do tax planning, the better.

Many people wait until the year-end for tax planning, but it’s better to do it earlier in the year when it’s easier to act on it. Why not make a tax planning appointment today? Call Dawn Siemer at 408-918-3162 on Mondays, Wednesdays or Fridays to make an appointment.

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Institute for Policy Studies criticizes stock options

The Institute for Policy Studies has issued a report, Restaurant Industry Pay: Taxpayers’ Double Burden, criticizing equity-based compensation, especially in the restaurant industry. The authors of the report point out that equity-based incentive plans are widely used in the restaurant industry, including Starbucks, Yum! Brands, Chipotle, Dunkin’ Brands and McDonalds. Corporate deductions of key executives aren’t limited to $1 million for equity-based compensation.

While executives are reaping huge incomes for which their employers receive tax deductions, the employer companies are lobbying through the National Restaurant Association against increases in the minimum wage. The position of the report is taxpayers are subsidizing large restaurant chains because of the “performance pay loophole” and because low-paid employees require public assistance, including Medicaid coverage.

This report is a symptom of our society becoming polarized with more wealth becoming concentrated in a few hands, and a declining middle class. (The percentages of the population in both the upper class and the lower class are growing, as the middle class is shrinking.)

Personally, I think equity-based compensation represents an opportunity to build wealth through brain power, which is actually egalitarian. It would be a shame to see the benefits of equity-based compensation curtailed when it has been a goose that has laid many golden eggs.

It may be that these large corporate employers need to rethink their policies of not sharing more of their pies with their lower paid employees, or they may suffer pushback like this report, threatening their tax benefits.

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IRS is looking at nonqualified deferred compensation plans

The IRS is planning to audit nonqualified deferred compensation plans of about 50 large firms, focusing on the 10 highest-paid employees. The IRS will focus on whether the employees made timely elections to defer their compensation and whether the compensation was paid to them less than six months after they retire.

The administration of these nonqualified plans has become more important with the adoption of Internal Revenue Code Section 409A. I call them “qualified nonqualified deferred compensation plans.” They now require attention that has traditionally been given to qualified retirement plans.

(The Kiplinger Tax Letter, May 23, 2014.)

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Does your group need a speaker?

We are seeking opportunities to speak before groups. Topics include recent tax developments, tax issues relating to real estate, how estate planning has changed recently, tax issues relating to alternative investments using retirement accounts, and marketing topics such as “How I created a public access television show broadcast on eleven Bay Area stations.” To make arrangements, call Michael Gray at 408-918-3161.

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Please share your good experiences with Michael Gray, CPA.

As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm. Some of the sites where you can share your experiences include yelp.com, siliconvalley.citysearch.com, and Google+.

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Financial Insider Weekly broadcast schedule for June and July.

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 June and July.

June 6, 2014, attorney Michael Desmarais, “Estate planning for second marriages”
June 13, 2014, attorney Jann Besson of Law Offices of Besson & Yarbrough, “Medi-CAL benefits for Long-Term Care”
June 20, 2014, Hilary Martin Hendershott, CFP(r), The Family Wealth Consulting Group, “Why most people will never achieve their financial goals”
June 27, 2014, Mark Erickson, attorney at law, “How to choose a good divorce lawyer” (Note change from program scheduled in last month’s newsletter.)
July 4, 2014, Mark Erickson, attorney at law, “How to work with a divorce attorney cost effectively”
July 11, 2014, Nancy J. Ross, divorce coach and mediator, Bauer, Shepherd & Ross and Associates, “How a collaborative approach can help make divorce a less painful process”
July 18, 2014, Bernard Vogel III, attorney at law, Silicon Valley Law Group, “Choices of forms for doing business”
July 25, 2014, Craig Martin, CFP(r), The Family Wealth Consulting Group, “The role of emotions in investing”

Financial Insider Weekly is also broadcast as follows:

    • Sunday at 1 p.m. on Comcast channel 26 in Santa Cruz County and on Charter Communications Channel 72 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 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
    • Tuesday at 10:30 a.m. on Comcast channel 26 in Santa Cruz County and on Charter Communications Channel 72 in Watsonville and Capitola
    • Tuesday 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

  • 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
  • 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
  • Saturday 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
  • Saturday at 1:00 p.m. on Comcast channel 26 and AT&T U-verse channel 99 in Marin County

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.

See the books mentioned at http://http://www.siliconvalleypublishingcompany.com/products/secrets-of-tax-planning-for-employee-stock-options-2014-edition or the Special Report, Nonqualified Stock Options – Executive Tax and Financial Planning Strategies at http://www.stockoptionadvisors.com/non-q_stock.

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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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