Facebook Tax Pay: Most people like to believe that big corporations are paying more in tax as they are as an individual. Unfortunately, this is not always the case. For example, CNN Money recently took a closer look at Facebook Inc (NASDAQ:FB) and its current tax situation.
In the article, the author touches on a claim by Citizens for Tax Justice, a tax advocacy group, that the social networking giant is not going to pay any United States income tax in 2012 despite a $1 billion profit.
As crazy as this may sound to the every day person, it is actually quite possible that this is going to happen. Not only is it possible, but it is also 100 percent legal.
The main point of conversation to pay attention to is a “sizable tax deduction from stock options that Facebook issued to its employees.”
Without getting too deep into tax laws in the United States, stop options are tax-deductible. In other words, these deductions can be used to offset profits.
With this strategy in mind, it is easy to see how Facebook Inc (NASDAQ:FB) would receive a tax refund of nearly $430 million – as is being reported by Citizens for Tax Justice.
In an email to Forbes, Facebook responded by saying that the company believes “Facebook said in an e-mail that the company believes “in paying our fair share, and we do pay our fair share.”
To dig deeper, the people at Forbes got in touch with a few tax experts to clear things up.
Stan Pollock, a San Francisco CPA had this to say regarding the group’s confusion between tax law and corporate accounting policies:
“[CTJ] is talking about apples and oranges … by mixing up two sets of rules, it’s easy to give misleading information.
Dan Morris, a senior partner at San Jose CPA firm Morris and D’Angelo, added the following:
“Some people have a hard time recognizing both sides of it. Where Facebook is taking a deduction, a person is counting that as income. U.S. taxpayers absolutely did not get the shaft here.”
There is no doubt that Citizens for Tax Justice will continue to look for ways to spin this story. However, it appears that everything Facebook Inc (NASDAQ:FB) is doing is legal.
Check back here for more updates on Facebook Tax Pay.
DISCLOSURE: I have no positions in any stock mentioned.
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