Facebook

Well, I would be excited too. Many of the employees became instant millionaires as a result of Facebook going public since as part of the company’s incentive plan, they were given Restricted Stock Units.

What Does This Mean for Overnight Millionaires and Their Taxes?

If you are ever so lucky to receive Restricted Stock Units, they are a promise to grant shares of stock, which are granted on a vesting schedule or meeting of certain milestones by you or company.  When vesting occurs, the value of the stock is included in your income as ordinary income and the employer is required to withhold taxes as soon as the RSU is vested whether you sell your shares or not.  If you later sell the shares, the change in value is a capital gain or capital loss.

Employee Stock Purchase Plans, on the other hand, are shares that you buy at a discount so you don’t have to pay taxes until you sell the stock.  When you sell the stock, the discount you received when you bought the stock is generally considered additional compensation to you and will be taxed as regular income.  If you sell your stock in less than one year, your gains will be considered compensation and taxed as ordinary income.  If however, you sell your shares after one year, your profit will be taxed at the lower capital gains rate.

If you are lucky enough to become an instant millionaire and you receive Restricted Stock Units you may be subject to higher taxes than under an Employee Stock Purchase Plan. Either way cha-ching. I really don’t think this would be a bad problem to have.  Stock options give you a chance to make more than your salary and they also give you a sense of ownership in the company.

Have you ever received employee stock options?  What type were they?

What is Gaming for Good with TurboTax and Toys for Tots?  It’s an easy to play game on Facebook that TurboTax created to donate holiday toys to Toys for Tots.  With three levels, we will test your memory by asking you to pair together images of varying tax deductible items.  And when you successfully complete “Gaming for Good”, TurboTax will donate one toy to a child in-need.  Essentially, you play and we give!  Easy, right?

We think every kid deserves to experience the magic of the holidays, but we can’t accomplish our goal without you.  Help us spread the word by doing the following:

• Game on!  Click this link to start playing!
• Facebook it!

o  Share this blog post on your Facebook wall

o  Invite your friends to play Gaming for Good with TurboTax and Toys for Tots

o Status tag your most competitive friend with your high score and challenge them to beat it.  Friendly (or not-so-friendly) rivalries encouraged.  After all, it’s for a good cause!

• Tweet it out!  Share this blog post with your Twitter followers.

Happy gaming!

What kind of story are we looking for? Specifically, let us know how TurboTax impacted your life…did you get a bigger refund than you expected? Find a deduction or credit you weren’t aware of before? Send your child to summer camp? Go on vacation for the first time in years because of that refund? Pay off bills you couldn’t catch up with before? Did you do your taxes for the first time ever?

We want to hear about all about it. Tell us your story.

Read the official rules.

A new status often means new tax implications (and strategies).

Take a look:

Did you Change your Status to Single?

While breaking up with a boyfriend/girlfriend is easy relative to going through divorce, annulment, or legal separation (Just donate his/her stuff to charity and call it a day!), don’t make the situation worse by ignoring important tax considerations. Among them: property settlements, alimony (It’s fully taxable as income to the recipient and provides an “above the line” deduction for the payer); and kids. Who get the tax benefits and exemptions as it pertains to them? Generally, the custodial parent does, but check your divorce decree to see if it specifies otherwise. As for filing status, many divorced people file as Single. However, if you are divorced and at least one of your kids lives with you, you are a custodial parent and will most likely be able to file as Head of Household. That’s a good thing – HOH status generally results in a much lower tax bill. Separated?  You can file as Married Filing Separately or Married Filing Jointly, but filing jointly is typically the most beneficial status (see below).

Did you Change your Status to Married?

If you exchanged “I Do’s” anytime in 2010–even if you got married just seconds before the ball dropped on New Year’s Eve–you will be considered legally married for the full tax year. One of the first things you need to do – in addition to contacting the Social Security Administration if you changed your name – is change your filing status.  You can either file as married filing jointly or married filing separately.  In some situations, you can even file as head of household, but you cannot file as single. What’s typically the best way to go? Married filing jointly.  It provides the lowest tax liability and the highest standard deduction. Yes, there are some situations where it might be advantageous to file separately – for example, if one taxpayer has high medical expenses and very little income, or if you suspect your spouse is involved in fraudulent behavior – know that when you file separately you lose valuable credits and deductions, from education benefits to student loan interest deductions and more.

Did you change your status to Engaged?

As you prepare for this next chapter in your life, don’t let the excitement and joy of it all prevent you from having a conversation about your financial future. Before you walk down the aisle, know where your soon-to-be spouse would like to be in 5, 10 years, what assets/liabilities they have (Does he/she owe back taxes? Child support from a former marriage? Has he/she defaulted on student loans?), how you’re going to tackle any existing debt, whether you’re going to keep your finances and investments separate or combine them, how you will handle daily spending decisions, and who will be responsible for paying the bills and preparing the taxes. At this time, you’ll also need to think about changing your withholding.

Did you change your status to In a Relationship?

Not all those in a relationship cohabitate, but for those who do, there are some tax implications.  No doubt, there are more couples living together these days–7.5 million opposite-sex couples in 2010, according to the US Census Bureau. That’s 13% more than in 2009. While some heterosexual couples living together can enjoy the rights of marriage without getting hitched the traditional way by claiming common law marriage (recognized by law in over a dozen states), most unmarried couples—especially same sex couples–are up against numerous financial hurdles compared with their married peers. From who gets the homebuyer credit to who claims the kids to health insurance coverage (The IRS doesn’t recognize domestic partners–That means benefits provided for your partner are treated as taxable income) to how you should structure purchases to maximize tax advantages, there are many issues to consider.

Did you change your status to It’s Complicated?

I’ll be honest… I’m not entirely sure what “It’s Complicated” means! If you changed your status to this option in 2010, chances are your taxes are the least of your worries.

Tune in for the next TurboChat Feb. 25, 2p.m. PST – 2:30 p.m. PST (5 p.m. EST – 5:30 p.m. EST). Visit our Facebook Page, become a Fan, and chime in with questions of your own so we can get you an expert answer, live.

View today’s TurboChat below:

But if you’re like me, wading through pages of reviews can be information overload. Wouldn’t it be great if you could see what your friend has to say about a book you want to read or find out if someone a lot like you (in my case, full-time job, 2 kids) can actually cook that recipe in 30 minutes?

Well, TurboTax has created a new way for people thinking about using tax software to see exactly what millions of other people have to say about their own TurboTax experience. Unedited, unfiltered truth from your friends and people whose taxes are probably a lot like yours’.

Today, TurboTax unveiled Friends Like You, a new, one-of-a-kind social experience that lets anyone view product reviews from their friends or people who have similar tax situations.

Friends Like You draws on social networks, such as Facebook or MySpace, to let you see and sort reviews from friends or from people like you. Friends Like You is centered around the Friendlyzer, a unique online recommendation engine. Whether you’ve bought a home, switched jobs or had a baby, you can use the Friendlyzer to check out reviews from others who’ve used TurboTax so you can see what they have to say and how it handles a particular tax situation.

Having the option to see, sort and filter recommendations and reviews makes shopping for anything that much easier. TurboTax is taking personal recommendations a step further by using some cool social tools to make it easy for people to talk and share. Friends Like You simplifies the process of sorting through reviews to find only those that are personal, relevant and from people you know and trust who also use TurboTax.

To find out what people like you think about TurboTax visit www.friendslikeyou.com, and let us know what you think by commenting below.

Below, we summarize TurboTax Facebook Fan questions and answers by Bob. In fact, it was such a popular one participant and blogger summed it up on his blog, Mortgage Report.

We decided to solicit a couple of additional questions about the Homebuyer Credit via Twitter, and Bob’s responses to those new questions are below. At the end of the post, you’ll see the full list of Q&A from yesterday’s chat, or take a look on the Facebook Page. For an in-depth overview of the Homebuyer Credit, check out this post by Bob on our blog.

Twitter Questions:

Q. My wife & I purchased our home last month. Should we amend our taxes our wait till we do our taxes in March/April?

A. Because it sounds like you purchased your house after Nov. 6, you’ll have to file for the Homebuyer Credit on your 2009 return. Along with the return, you’ll have to include the settlement statement to support the claim for the credit. Filing an amended 2008 return is not an option because of when you purchased your home.

———————

Q. My former home owner wrote a check for property tax, but I purchased before tax date and reimbursed. Did he pay the tax or did I?

A. The settlement statement will show the proportionate tax applicable to the seller and buyer (you). Even though the former owner paid for the full year, your reimbursement for the months you lived in the house qualify you for a deduction for that amount you paid.

Facebook Questions:

Q. What if a buyer’s federal tax obligation is less than the tax credit? Does the buyer receive the full amount or just an amount up to his/her federal tax obligation?

A. The Homebuyer Credit is a “refundable” credit, which means that you get the full credit regardless of your tax liability. In other words, the IRS will send you a check if your credit is more than the tax liability/withholding.

———————

Q. What will be the earliest day I will be able to file online this year?

A. TurboTax Online is up and running now. While not all IRS forms are final yet, most should be final by Jan. 1, 2010. So get ready and get going. By the way, if you’ll be claiming one of the Homebuyer Credits, you may have to wait a few weeks because the credit form for this won’t be final from the IRS until sometime in January.

———————

Q. Can you tell folks the top 3 things EVERYONE should know about this credit?

A. 3 things you need to know about the Homebuyer Credit:

1. The credit is available to first time AND existing homebuyers. The credit amounts are $8000 and $6500 respectively. And pay attention to the rules. For example, a first time buyer simply means you have not owned a principal residence in the last three years.

2. The purchase date has been extended to June 30, 2010, but you have to have a signed contract in place by April 30, 2010.

3. Those claiming a Homebuyer Credit on their 2009 return will have to paper file the return. The IRS will NOT accept the return electronically because they need a copy of your settlement statement to substantiate your purchase. Having to file a paper copy of your return is big disappointment because it will delay your refund from days to weeks.

———————

Q. If the transaction closes on or after Jan. 2, 2010, can the home buyer still claim the tax credit on their 2009 tax return? If the transaction closes after April 15, 2010 (but before June 30, 2010), would they file an amended return for 2009?

A. The beauty of the Homebuyer Credit is that you can get the credit dollars pretty fast. So, if you purchase in 2010, you have the option to claim the credit on your 2009 return (either the originally filed one or even an amended return). By doing so, you get your credit dollars relatively soon versus having to wait to claim the credit on your 2010 tax return which would be filed in 2011.

———————

Q. Would a current homeowner be eligible for the extended Homebuyer Credit if they purchased a second home in another state this year? They did not sell their current home, but were told by their Realtor that they can claim the credit.

A. As long as you owned and lived in the existing home for at least five consecutive years of the eight years prior to the purchase date of your new home, you may qualify. There are other requirements like income and purchase price, but otherwise you should qualify. By the way, there is no requirement that you sell your existing home.

———————

Q. Just sold a piece of farm land that was part of an inheritance. I will have to pay Capital Gains tax. Do I have to pay an estimated tax in January for this tax?

A. Depending on the amount of the gain, you may have to pay estimated taxes by Jan. 15, 2010. It all depends on how much the gain was. There are (complicated) rules that govern whether you have to pay estimated taxes. For example, if your tax payments (like withholding taxes) by end of year cover 90 percent of your tax liability for 2009, you more than likely will not have to pay estimated taxes. Any balance you owe would be paid at the time you file your return. Also, for most filers, if the taxes you paid by end of year equal or exceed your 2008 taxes, then you won’t have to pay estimated taxes. Without knowing more about your specific tax situation, I’d guess that you will not have to pay estimated taxes. I would suggest, however, that you use TurboTax now to find out if you’ll have to pay estimated taxes.

———————

Q. Can [you] file [through] Turbotax.com with the Homebuyer Credit [or do you] need to go [through] [H&R] or [Hewlitt Packard]?

A. You can use any version of TurboTax to claim the first time Homebuyer Credit. However, you won’t be able to file until sometime in January when the IRS releases the final form for claiming this credit. Also, those claiming the credit will have to paper file their return because of the IRS requirement to attach your closing statement. This paper filing requirement is true for ALL filers, regardless of whether you use tax software or go to a pro.