3 ms·

> That's just for tax avoidance, those 'bonuses' Can you teach me how this tax avoidance works? It seems that I am missing out. Can you also specify the jurisd

by vostok 10y ago

> That's just for tax avoidance, those 'bonuses' Can you teach me how this tax avoidance works? It seems that I am missing out. Can you also specify the jurisdiction where this works? > mostly part of their contract I can think of many people whose bonuses are 3x or more their salary and who do not have a guaranteed minimum bonus or even a strict formula based bonus.

Retric 10y ago
http://blog.turbotax.intuit.com/income-and-investments/bonus-time-how-bonuses-are-taxed-and-treated-by-the-irs-8003/ http://blog.turbotax.intuit.com/income-and-investments/bonus... 1. The Percentage Method The IRS specifies a flat “supplemental rate” of 25%, meaning that any supplemental wages (including bonuses) should be taxed in that amount. This works for bonuses up to 1 million. > I can think of many people Yes, there are plenty of idiots even in finance.
- ahh 10y ago
  This only affects the withholding of bonuses (the amount the IRS has you pre-pay as an estimate of taxes.) It does not affect the actual income tax on bonuses. (It's mostly a disadvantage. I get about 60-70% of my income in bonus and stock which is treated the same; it just means that, if I don't plan ahead for it, I end up with a surprise tax bill on April 15th. I do plan ahead, but the whole process is obnoxious.)
  - Retric 10y ago
    I find large interest free loans useful.
    - vostok 10y ago
      You will have to pay penalties if you underpaid over the course of the year. This makes it not interest free.
      - Retric 10y ago
        There are plenty of games you can play with withholdings. EX: As long as you witholdings are enough to pay last years taxes or 90% of this years you are good. Or if your bonus is in January you can have a higher witholdings from salary and the default 25% from the bonus. Just balance it by the end of the year. But that's just simple stuff, there are also other benefits to the company.
    - ahh 10y ago
      I don't hate this (and it's why I don't pay quarterlies--also, I tend to generate enough deductions to be okay.) But it's absolutely not correct that paying people with bonuses lowers their effective tax rate.

by vostok 10y ago

Retric 10y ago

http://blog.turbotax.intuit.com/income-and-investments/bonus-time-how-bonuses-are-taxed-and-treated-by-the-irs-8003/ http://blog.turbotax.intuit.com/income-and-investments/bonus... 1. The Percentage Method The IRS specifies a flat “supplemental rate” of 25%, meaning that any supplemental wages (including bonuses) should be taxed in that amount. This works for bonuses up to 1 million. > I can think of many people Yes, there are plenty of idiots even in finance.

ahh 10y ago
This only affects the withholding of bonuses (the amount the IRS has you pre-pay as an estimate of taxes.) It does not affect the actual income tax on bonuses. (It's mostly a disadvantage. I get about 60-70% of my income in bonus and stock which is treated the same; it just means that, if I don't plan ahead for it, I end up with a surprise tax bill on April 15th. I do plan ahead, but the whole process is obnoxious.)
- Retric 10y ago
  I find large interest free loans useful.
  - vostok 10y ago
    You will have to pay penalties if you underpaid over the course of the year. This makes it not interest free.
    - Retric 10y ago
      There are plenty of games you can play with withholdings. EX: As long as you witholdings are enough to pay last years taxes or 90% of this years you are good. Or if your bonus is in January you can have a higher witholdings from salary and the default 25% from the bonus. Just balance it by the end of the year. But that's just simple stuff, there are also other benefits to the company.
  - ahh 10y ago
    I don't hate this (and it's why I don't pay quarterlies--also, I tend to generate enough deductions to be okay.) But it's absolutely not correct that paying people with bonuses lowers their effective tax rate.