Facebook Employees will pay $ 1 M taxes after the IPO

Facebook employees will have to pay an average of $ 1 M taxes after the IPO of the largest social network in the world. CNNMoney reports about this, referring to Facebook. According to the American news website, 3500 social networks employees will have to pay $ 4 B taxes this year, an average of $ 1.1 M per person.

High tax rates associated with the choice of a particular Facebook motivation scheme - the issuance of restricted stock units, RSU. An employee who received RSU, can flog them only after the occurrence of any event defined in advance (IPO, for example).

Facebook has become one of the first technology companies that started using this scheme.

RSU motivation scheme has some taxation peculiarities: workers will have to convert their RSU in shares within four weeks, 5-6 months after the IPO. During this month the social network will release about 277 M shares to flog employees’ RSU.

The U.S. tax code allows considering RSU not as stocks, but as ordinary income, because restricted stock units are the part of the compensation. In this case, employees have to pay taxes at the federal level and at the level of the State of California, which is about 45 percent.

If the company gives employees stock grants to motivate them and options to purchase shares, tax payments can be minimized, holding or postponing the exchange of contracts on securities. It is not possible if we talk about RSU.

Facebook intends to raise about $ 5 B during the IPO. One share in the IPO will worth from $28 to $35.