Minimizing tax consequences...

I think there was a general discussion a while back but I can't seem to find it, so....

 

For those folks getting significant signing bonuses, how have you dealt with the tax consequences of being pushed into a higher tax bracket for the year you get the signing bonus? What about Alternative Mimimum Tax (AMT)? What other issues have you run into?

 

Same sorts of questions for royalty payments.

 

The reason I'm asking is that this gets into some specialized stuff and at least one accountant I spoke with was blowing smoke and clearly didn't have a clue about O&G income (signing bonus, royalty treatment, etc).

 

Mike

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Permalink Reply by craig on August 22, 2011 at 8:20am

 Mike,

Unless Ohio is very different than  Pa., there is not a local tax on unearned income.

Permalink Reply by Mike h on August 22, 2011 at 8:32am
I'll have to check into that Craig. If that's the case I'll be doing a little jig.... not because I'm stingy but because the officials where I live would just piss it down the drain. Our income now is basically all earned income.
Permalink Reply by Finnbear on August 22, 2011 at 11:34am
The local tax should only be on earned income unless you live in Scroogeville.
Permalink Reply by Terry W. on August 22, 2011 at 9:21am

I have read that you can deduct your pre paid funeral expenses, along with the tombstone;

you gotta go someday and this is money that will need to be spent.  It might just get you

into a lower tax bracket....worth crunching some figures

Permalink Reply by Mike h on August 22, 2011 at 9:32am
It would have to be one hell of a funeral to make a difference on the taxes.
Permalink Reply by DM on August 22, 2011 at 9:43am

I've always heard you could give up to a certain amount per year to your children, provided they are minors and it could possibly be tax deductable.  I've heard figures of 8,12, and 15 grand per year, per child.  Not sure on the figures though.

Permalink Reply by Mike h on August 22, 2011 at 10:00am

Dave,

 

It's not a function of the recipient being your children. It is $13,000 per year per recipient. If you are married, both spouses can contribute (total $26,000) to a single individual without triggering gift tax. There are specific exclusions such as paying tuition for your child.  Here is the link to the IRS page about it - http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

Permalink Reply by craig on August 22, 2011 at 2:11pm

I am not up to date on my tax law, but in the past I had to deal with gifting maximum amounts to individuals. This maybe out of date, but.....

If you are in a position to gift away lots of money you could jeopardize your future estate tax when you die. Gifting used to and may still lower the threshold for the size of an estate before triggering a federal estate tax.  At least I'd read up on the new regulations concerning this. I would compare what I might save gifting away tons of money in relation to what your federal estate taxes might be when you die after gifting lots. Of course the IRS can, has and will change the regs at anytime.

 

Permalink Reply by Anthony Hunter on August 24, 2011 at 11:21am
Giving a gift to a family member has no income tax deduction available.
Permalink Reply by Anthony Hunter on August 24, 2011 at 11:20am

Funeral expenses are a deduction for estate taxes only.

 

Permalink Reply by Mike R on August 24, 2011 at 12:51pm

If you're expecting less than $75,000 per year, form a C Corp (and get your EIN) before signing the lease. Set the Corp up in a no corp state income tax state like NV or WY. The federal tax rate is 15%, plus you get to deduct many other things. Setting up a Corp is not expensive - less than $500 if you DIY. You may need a registered agent if you're out of state.

 

To get your money out, pay yourself a salary (not dividends) over a period of time.

 

Best if you talk with a CPA.

Permalink Reply by Mike h on August 24, 2011 at 1:34pm

Why the $75,000 limit?

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