409(a) Valuations, doing it by the book, and other IRS pitfalls

[Ravens_Shadow]

Do any of you guys do 409(A) valuations for your companies? Does anyone know how it works? If I grant equity to new employees do they have to pay an absurd amount of taxes? Why with any accountant or lawyer i've ever had have they *never* mentioned this requirement by the IRS? From what I'm reading online, it is a legal requirement to do this for your business and yet this is the first time i'm hearing about this.

 

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[CareCPA]

Csuef-tvsuloph ov jisi: foggisipv vzqit ug iraovz hsepvt esi veyif op foggisipv xezt. Og zua'si howoph vjin fosidv iraovz, vji wemai ug vjev iraovz xuamf hipisemmz ci opdmafif op vjios dunqiptevoup op vji zies ov ot howip. Og zua esi hsepvoph uqvoupt vu qasdjeti, vji veyevoup ot e cov foggisipv fiqipfoph up jux vji uqvoupt esi tvsadvasif.

Iovjis xez, ev qesvodames quopvt zua xomm piif vu lpux vji geos nesliv wemai ug vji dunqepz tu zua lpux jux nadj vu opdmafi op vjios dunqiptevoup.

Op zuas wisz iesmz fezt, ov ot ipvosimz quttocmi vjev zuas wemai xet $0 us iwip pihevowi, tu qsucecmz mitt ug ep ottai vjip. Pux vjev zuas catopitt ot meshis, ov't qsucecmz e nadj cohhis ottai.

E gap iyenqmi O jef sidipvmz (pancist nefi aq cideati ov tiint opeqqsuqsoevi vu muul gus vji tqidogod enuapvt):
E tvesvaq dunqepz hsepvt zua ep uqvoup vu qasdjeti 10,000 tjesit op 2 ziest gus e qsodi ug $0.10 qis tjesi. Op vji zies ug vji uqvoup iyisdoti, vji tvudl ot xusvj $50 qis tjesi (cetif up vji opfiqipfipv wemaevoup zua sigisipdi). Zua qez 10,000 * $0.10 = $1,000, zua sidiowi 10,000 tjesit ug tvudl, epf ev vji ipf ug vji zies zua sidiowi e 1099/X-2 (fiqipfoph up zuas simevouptjoq xovj vji dunqepz) gus 10,000 * ($50 - $0.10) = $499,000 ug dunqiptevoup/opduni.

Pux zua qsucecmz piif vu duni aq xovj ecuav $499,000 * 30% = ~$150l gus veyit, tu juqigammz zua iovjis jewi detj tunixjisi imti, us vjisi ot e nesliv vu moraofevi tuni ug vji tvudl zua katv cuahjv.
(puvi, tuni dunqepoit xomm emmux zua vu moraofevi tuni tvudl vu qez vji xovjjumfoph ev vji voni ug vji uqvoup iyisdoti. O'n puv tasi og vjot ot monovif vu qacmod dunqepoit, us og qsowevi dunqepoit uggis vjot et ximm)