Facebook founder Mark Zuckerberg may get hit with a $1 billion tax bill for last year’s earnings.
The hefty tax is due to his move last May to increase his stake in Facebook’s stock market share. Zuckerberg purchased 60 million Facebook shares on the day of Facebook’s first public offering at a ‘strike price’ of 6 cents each. In other words, Zuckerberg must report nearly $2.3 billion worth of income from his stocks.
In addition to his other income, he will have to pay the 2012 federal tax rate of 35 percent for his bracket, and add the California rate of 13.3 percent, which amounts to a hefty 48.3 percent tax rate for the billionaire.
Although his individual tax return information is private, three California CPAs and CNNMoney crunched some estimates and believe that the $1 billion bill is roughly accurate.
"With numbers that large, it's usually capital gains, not ordinary income," said Toby Johnston, a partner at tax firm Moss Adams LLP's Silicon Valley office, who regularly works with wealthy clients such as Zuckerberg.
The Internal Revenue Service releases a report every year about the 400 U.S. tax filers with the largest reported income. The report claims the average top earner brought in $202 million, and had to pay only $41 million worth of taxes.
Yet, despite a tax bill that is larger than a small country’s GDP, there is something to be said for being able to afford a bill that large.
"Most people are thrilled, to tell you the truth," said Stan Pollock, who works as a San Francisco area accountant for technology workers. "I have had very few clients that get these huge windfalls who have resented paying the tax. They know they got lucky."