- Feb 16, 2003
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For example, let's say someone makes $300k anually but they receive a nice big $4 million bonus every year. Is there some tax advantage to having most of it as a bonus or something?
Tax advantages to lower salary and very large bonus?
- Thread starter AgaBoogaBoo
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- Feb 16, 2003
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- Nov 27, 1999
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- Nov 27, 1999
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- Feb 16, 2003
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Right, but why?Originally posted by: Zim Hosein
Yes, why do you think CEO's have a salary that is a fraction of their bonus AgaBoogaBoo?
:beer:
- Nov 27, 1999
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How about something more people can relate too ??
If I made $300K/yr and 4 million bonus, I wouldn't be asking this type of question on ATOT.
A more likely example would be making $32K with more than $10K bonus.
This is actually what happen to me one year and I didn't see any tax break.
I think its worst actually.
They take like >40% on my bonus checks and people were telling me I'll get it all back at the end of the year but i didn't see it.
If I made $300K/yr and 4 million bonus, I wouldn't be asking this type of question on ATOT.
A more likely example would be making $32K with more than $10K bonus.
This is actually what happen to me one year and I didn't see any tax break.
I think its worst actually.
They take like >40% on my bonus checks and people were telling me I'll get it all back at the end of the year but i didn't see it.
I would think not.
True you would pay less taxes over the course of the year, but you'd be taxed the hell out of your bonus as well.
Unless you're the head of a company that rhymes with Pendon or Morlddom.
True you would pay less taxes over the course of the year, but you'd be taxed the hell out of your bonus as well.
Unless you're the head of a company that rhymes with Pendon or Morlddom.
- Mar 20, 2000
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cash bonus? no, no tax advantage. unless you can keep putting it off (unofficially, of course, because if you officially decided that the company would hold your bonus, and you're in control of the company, then you're still in control and you'd still be taxed) you can wait to take it until you have things to offset it.
Not for non-CEOs, no. It's taxed exactly like the rest of your salary, including all of the deductions. But you don't get taxed extra either, except temporarily (witholding).
Originally posted by: Zim Hosein
Yes, why do you think CEO's have a salary that is a fraction of their bonus AgaBoogaBoo?
I don't have much knowledge on the subject but I would have to say NO.
You get taxed more on bonuses because its a supplemental income.
I'm guessing the reason why CEOs get the huge bonuses is because the copanies to to compensate them relative to the success of the company(although we all know its not true)
I can tell you on a personal level that its not.
Bonuses are taxed more because its a supplemental income.
Normally any bonus like that is going to be taxed at the officer's marginal tax rate which is a LOT of money. If they were smart they'd ask for restricted stock options instead with an exercise price = the FMV, exercise the options, and make a Section 83(b) election, then when they sell the appreciated stock when the restrictions lapse they only have to recognize a LTCG on the appreciation.
And, yes, if you're deemed to have constructive ownership of some amount of compensation you'd be taxed in the current year.
And, yes, if you're deemed to have constructive ownership of some amount of compensation you'd be taxed in the current year.
no tax advantages, unless you are willing to spend a decent fraction of that bonus on a tax 'planner'....
companies dont do that so you can save on taxes... they do that so they can
a) pay for performnace and not just for showing up every morning at 8 am
b) pay ppl vastly different compensations while retaining them in the same 'grade' level or whatever
if you can use the countless tax loopholes, thats an added bonus for you, but thats not the reason for doing it
companies dont do that so you can save on taxes... they do that so they can
a) pay for performnace and not just for showing up every morning at 8 am
b) pay ppl vastly different compensations while retaining them in the same 'grade' level or whatever
if you can use the countless tax loopholes, thats an added bonus for you, but thats not the reason for doing it
Then your company isn't including it on your W-2 at the end of the year like mine does?
Out of curiousity I just dug out a form 1040 and I don't see where you'd report this as anything other than gross income, which is mostly taxed the same except lower for some items like dividends and capital gains.
(It might seem like you were taxed higher because as noted above the extra income will be taxed in your highest tax brackets, just like the additional income from a raise.)
NO, my bonus paychecks come every month.
My regular paychecks, I gross around $700 and take home is about $525.
One of my bonus paycheck, I grossed $650 and take home was $400.
And yes, they are all included on the W-2.
Before, a long time ago, bonus checks were included in the regular paychecks and they were taxed the same but since they seperated the 2, bonus checks are always taxed more.
But that's just witholding, not what you actually pay at the end of the year on your 1040.
If it appears on your W-2 mixed in with your regular wages then you are not being taxed more when you actually pay your taxes.
Good lord man, what on earth are you talking about....I think I do know how my paychecks are taxed.
Two yrs ago year ago, my salary was $32,500 and my bonus was more than $10K and my W-2 shows that I made ~$43,000 as it should be.
When I do get my bonus checks individually, they are always taxed more than my regular checks.
I never said how your bonuses are taxed but mine are taxed more...plain and simple.
Heres are 2 exact examples that I found in my old stubs:
Regular paycheck:
$663.46- Gross pay
- $66.04- Federal tax
- $9.62- Fed Medicare
- $41.13- Fed Social S
Bonus paycheck:
$652.67- Gross pay
- $163.17- Federal tax
- $9.62- Fed Medicare
- $40.47- Fed Social S
The tax advantage is for the company.
If the 4 million is for salary the company cannot write as much of it off. (I believe the salary write off is 1 million)
For the person it does not matter. You will pay the same at the end of the year.
If the 4 million is for salary the company cannot write as much of it off. (I believe the salary write off is 1 million)
For the person it does not matter. You will pay the same at the end of the year.
kranky
Elite Member
- Oct 9, 1999
- 21,020
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There's no tax advantage in taking a bonus vs. salary.
CTrain, DaveSimmons is right. They WITHHOLD more in taxes from a bonus check, but it doesn't mean you end up PAYING more taxes on the money.They withhold 25% in federal tax from bonuses, but when you figure your final tax return that money is taxed at the same rate as all your other income.
CTrain, DaveSimmons is right. They WITHHOLD more in taxes from a bonus check, but it doesn't mean you end up PAYING more taxes on the money.They withhold 25% in federal tax from bonuses, but when you figure your final tax return that money is taxed at the same rate as all your other income.
Regular check withholding is done based on the wage table, your exemptions etc, while taxes are withheld from bonus checks based on a flat rate. Thus, the bonus money might have a different rate of withholding, but it is not treated differently in terms of taxation.
Drekce
Golden Member
- Sep 29, 2000
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I don't think you understand how taxes work do you? You are having more tax withheld from your bonus check, but at the end of the year you are being taxed the same exact amount. It does not matter whether your bonus is included in your regular check or not...the tax is the same.
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