Lowering Taxes Paid on Signing Bonus

I would like to hear some advice from others who have received their signing bonuses, as to the best ways to minimize and/or defer the taxes due.  Thanks in advance for your feedback.

Bob Ellis

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Permalink Reply by Tim Tarr on February 5, 2013 at 4:55am

Take your payment in stock

Donald,

   I tried that one and boy am I glad they said no. Oh it was CHK, $28 at the time.

Permalink Reply by Janice L. Hancharick on February 2, 2013 at 3:13am

It's just as well companies DON'T.  When 2008 hit several companies went belly up, so  lease signers expecting to get a yearly income for a few years were left high and dry.

Permalink Reply by Frank Walker on February 2, 2013 at 4:17am

Robert

There are ways which supposedly minimize tax hits on bonus payments.  They must be put into effect before the bonus payment is made to you by gasco.  If you've already received your bonus payment it is too late.

Structuring of lump sum payments is a very tangled and difficult area of tax law, one fraught with "gotchas".  I am not personally trusting of the schemes available.  But others swear by them.

As for timing of tax payments, and concerns about being "late":

Study and learn the safe haven rules, both Federal (IRS) and state.  Then study 'em again and be darn sure you understand 'em.  You cannot pay tax late and be OK.  But if you pay the safe haven amounts timely, you will be fine.  In the case of Federal tax, the safe haven rules are IRS rules for goodness sake. Still, some folks are afraid of them.  Most of those same folks don't want to apply themselves and do the requisite study.

That said, all the safe haven rules will allow you to do is keep your money a while longer.  You have to pay the tax eventually.  And with interest rates so ridiculously low as they are today, the value of keeping your money longer is not all that much.  Course for a gargantuan bonus payment, use of the safe haven rules might still net you an amount of money worth the trouble.

Permalink Reply by RichR on February 2, 2013 at 4:40am

IRS

Read the IRS directions about underpayment of estimated taxes.  If you didn't receive income until late in the year there is no way you can make estimated tax payments during the whole year.  So you need to include a worksheet that will calculate things for you.  They think of everything.

Permalink Reply by RichR on February 2, 2013 at 7:48am

I don't know about other states, but PA basically uses the same rules.

Permalink Reply by RichR on February 4, 2013 at 1:45pm

I hope everyone noticed on my post that the blue IRS is a clicky to bring up the IRS information and worksheet.

Permalink Reply by Robert J Ellis on February 2, 2013 at 7:22am

Great information.  I hope others are reading along.

Permalink Reply by maria armes on February 4, 2013 at 2:10am

I was mistaken it was 5.9% to Ohio.  

Permalink Reply by melissa humphrey on February 4, 2013 at 11:32am

tax cannot be avoided.

Permalink Reply by Angela Smith on February 4, 2013 at 11:37am

The discussion is about minimizing taxes not avoiding them.

Permalink Reply by jason smith on February 4, 2013 at 7:00pm
I thought if you voted for Obama, you do not pay any taxes.
Permalink Reply by Martha Stevens on February 5, 2013 at 1:28pm

lol

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