Facebook IPO A Tax Boon

Major Tax Implications to Arise

With 800 million users across the world, Facebook is perhaps one of the most successful websites the Internet has ever seen.

And when the Menlo Park-based company goes public, the site borne in a dorm room is set to have major tax implications after its initial public offering (IPO) is released.

For starters, founder Mark Zuckerberg’s taxes are set to rise to $1.5 billion in May after the company’s shares begin their public trading. Zuckerberg was granted stock options in 2005 as part of his compensation, and once they’re exercised after the IPO he’ll get to buy them for the 2005 price. The difference between that and the post-IPO price is considered taxable income and is likely to be worth billions.

Sacramento politicians have also gotten into the mix. With a ballpark figure of $500 million in state tax revenue from Facebook’s IPO, Republicans in the legislature used the expected windfall as an excuse to defriend the governor’s proposal to raise some taxes.

It’s no surprise Facebook’s IPO has become political football. The popular website sees major activity, with about half its users logging on every day. That’s a lot of potential eyeballs viewing its internet ads, which generate a lot of income and a lot of taxes to pay.

After Facebooks shares start selling on the stock market, more people in Silicon Valley will rise to the top tax bracket. But you don’t have to be a Silicon Valley millionaire to owe back tax debt to the IRS.

The IRS’ collection action is the extreme opposite of a friend request. If you owe back tax debt, hiring a tax attorney can increase your chances of avoiding a wage garnishment or tax lien and obtaining a tax settlement that works in your favor.

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