U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
 
Old 06-16-2018, 12:33 PM
 
6,308 posts, read 7,990,836 times
Reputation: 7903

Advertisements

Unexpectedly and happily, I was surprised to see a chunk of money direct deposited into my checking account from my ex-employer yesterday. They do a bonus payout that is split, so you get part of your bonus in December and the rest in June. I received my December bonus payout, which I was expecting, and thought that's it because I separated from the company in 2017. Well surprise surprise!

I want to take this money and use the gross amount for a 2018 IRA contribution. I think it's considered part of "earned income" in which case I'll be able to use this money to fund my IRA. In prior years I notice bonus payouts did have 401K contributions subtracted from them, if the employee opted in to 401K contributions. On this payout since I'm no longer an employee no contributions were taken out, just taxes.

So... earned income, yes? And I can use the gross amount towards a tax-deferred IRA, within the IRA limits, of course?
Quick reply to this message

 
Old 06-16-2018, 12:36 PM
 
844 posts, read 359,406 times
Reputation: 875
Quote:
Originally Posted by lottamoxie View Post
Unexpectedly and happily, I was surprised to see a chunk of money direct deposited into my checking account from my ex-employer yesterday. They do a bonus payout that is split, so you get part of your bonus in December and the rest in June. I received my December bonus payout, which I was expecting, and thought that's it because I separated from the company in 2017. Well surprise surprise!

I want to take this money and use the gross amount for a 2018 IRA contribution. I think it's considered part of "earned income" in which case I'll be able to this money to fund my IRA. In prior years I notice bonus payouts did have 401K contributions subtracted from them, if the employee opted in to 401K contributions. On this payout, since I'm no longer an employee, no contributions were taken out.

So... earned income, yes?
Yes, it should be reported as W-2 wages so definitely earned income.
Quick reply to this message
 
Old 06-16-2018, 12:46 PM
 
6,308 posts, read 7,990,836 times
Reputation: 7903
Quote:
Originally Posted by SuiteLiving View Post
Yes, it should be reported as W-2 wages so definitely earned income.
WOOT! Happy Dance!

2018 IRA contribution sorted.
Quick reply to this message
 
Old 06-17-2018, 08:28 AM
 
3,536 posts, read 1,988,790 times
Reputation: 6123
Yes also



Quote:


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. If you receive a $5,000 bonus, under this rule, $1,250 (25% of $5,000) goes straight to the IRS.Nov 9, 2017
Quick reply to this message
 
Old 06-17-2018, 08:37 AM
 
844 posts, read 359,406 times
Reputation: 875
Quote:
Originally Posted by SWFL_Native View Post
Yes also

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. If you receive a $5,000 bonus, under this rule, $1,250 (25% of $5,000) goes straight to the IRS.Nov 9, 2017
FYI - under the TCJA the rate is now 22%
Quick reply to this message
 
Old 06-17-2018, 03:18 PM
 
6,308 posts, read 7,990,836 times
Reputation: 7903
But I could put the entire $5k gross amount into an IRA (tax deferred) and claim that on my taxes for the deduction, yes?

Last edited by lottamoxie; 06-17-2018 at 03:59 PM..
Quick reply to this message
 
Old 06-17-2018, 03:19 PM
 
Location: OH>IL>CO>CT
4,747 posts, read 7,495,900 times
Reputation: 6347
Quote:
Originally Posted by SWFL_Native View Post
Yes also
Quote:
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. If you receive a $5,000 bonus, under this rule, $1,250 (25% of $5,000) goes straight to the IRS.Nov 9, 2017
Not "taxed, but "withheld".
So unless your normal marginal tax bracket is 25 (or now 22%) or above, you may see some of that money back as a bigger refund, or less tax owed, come April 1040 time.
Quick reply to this message
 
Old 06-19-2018, 02:27 AM
 
6,308 posts, read 4,767,382 times
Reputation: 8437
Quote:
Originally Posted by lottamoxie View Post
But I could put the entire $5k gross amount into an IRA (tax deferred) and claim that on my taxes for the deduction, yes?
Yes, as long as your total IRA contribution for the year does not exceed the maximum.
Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


 
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:
Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top