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End of the year bonus - quick tax question! Pls help.

Taxes and regulation

Sid23

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I'm a fulltime W-2 wage earner with no side businesses, real estate or other write offs. I usually receive a tax return refund of about $1,500, give or take.

I'm going to be receiving a bonus in the next couple days, and my boss has asked if I'd rather take the bonus without the taxes taken out and deal with them myself. Or, I can receive the bonus with taxes already taken out.

Last year, I received the bonus with taxes taken out, so I only received $5,700 out of my $10,000 bonus.

I'm thinking this year will be at least $10k, possibly more, so maybe I should take the money up front and figure out how to deal with the taxes later?

Has anyone ever dealt with this before?

(sorry if this is a slowlane topic)
 
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Diane Kennedy

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I'm a fulltime W-2 wage earner with no side businesses, real estate or other write offs. I usually receive a tax return refund of about $1,500, give or take.

I'm going to be receiving a bonus in the next couple days, and my boss has asked if I'd rather take the bonus without the taxes taken out and deal with them myself. Or, I can receive the bonus with taxes already taken out.

Last year, I received the bonus with taxes taken out, so I only received $5,700 out of my $10,000 bonus.

I'm thinking this year will be at least $10k, possibly more, so maybe I should take the money up front and figure out how to deal with the taxes later?

Has anyone ever dealt with this before?

(sorry if this is a slowlane topic)

I am a CPA, but don't have all the details - so disclaimer, disclaimer, disclaimer

Do a quick estimate of how much in taxes you'll owe. If you've paid in enough already then don't overpay (why wait for your money?), if you haven't then tell your boss exactly how much you want withheld.

And then thank your boss for letting you have a choice - that was very thoughtful. :)
 

Sid23

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Do a quick estimate of how much in taxes you'll owe.

Diane, thank you for the response! I was hoping you'd chime in here.

Is there a quick and easy way to estimate taxes owed? I have my last paystub here...
 

Sid23

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Yeah, I had a feeling that was going to be a follow-up question, which is why I suggested just paying it now...better to overpay for 3 months than to underpay... :)

Jscott, so you are saying the amount of taxes paid won't change, it's simply in the timing of when I would have the funds? (i.e. I get $2k back, either by withholding it from the bonus OR waiting until I get my refund in a few months?)

I know this is elementary...I'm not finished with TaxLoopholes yet! (but I'm getting there...)
 
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Sid23

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Jscott,

Thank you for this. Wonderful explanation and yes, it all makes sense. I see the downside in not having the taxes deducted from the bonus...

rep speed ++

I'll probably just go ahead and have the taxes taken out. Granted, I see how I'm giving the loan to the gov't, but I'll file my return as soon as I get my W-2 and get the money back.

At this stage, I'm not losing "that much" by waiting a couple of months for the money...

Thanks again. I really appreciate the explanation.
 
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