My crazy severance check came today. I was oddly nervous about opening it - which I can't really explain.
Jason and I have done some math regarding the distribution of the funds. We agreed early on to pay off my HELOC, that's bank speak for home equity line of credit, which now that the condo has sold (fingers crossed things are moving smoothly) we have to do anyway. But I'll also be clearing up two credit cards leaving me with just a car payment. The rest, will go into the bank until after the wedding.
I'm nervous that we'll be taxed to high heaven on a big chunk of it (thank you AIG) and that if it comes time to pay my unfair 90% tax rate on this money that I earned that we won't have it. So, a CD it will be for us. (To clarify, I do not mind at all paying the highest taxes required of everybody in my tax bracket...I mind being singled out in a way that hurts my family.)
I'm also opening my business checking account today. My accountant tells me that it's just easier to run the expenses through the business and deposit the consulting $$ into that account vs. mingling it into my regular checking. Seems like a reasonable bit of advice.
All of a sudden I feel like a grown up. "Accountant" "Taxes" "My Family" wow...
1 comment:
House bill:
http://online.wsj.com/public/resources/documents/tarpbonusesbill20090318.pdf
"(1) IN GENERAL.—The term ‘‘TARP bonus’’ means, with respect to any individual for any taxable year, the lesser of—
(A) the aggregate disqualified bonus payments received from covered TARP recipients during such taxable year, or
(B) the excess of—
(i) the adjusted gross income of the taxpayer for such taxable year, over
(ii) $250,000 ($125,000 in the case of a married individual filing a separate return).
(2) DISQUALIFIED BONUS PAYMENT.—
(A) IN GENERAL.—The term ‘‘disqualified bonus payment’’ means any retention payment, incentive payment, or other bonus which is in addition to any amount payable to such individual for service performed by such individual at a regular hourly, daily, weekly, monthly, or similar periodic rate.
(B) EXCEPTIONS.—Such term shall not include commissions, welfare or fringe benefits, or expense reimbursements."
So, even assuming your severance fits the definition of a "disqualified bonus payment" (which it seems to me it does not), if your Adjusted Gross Income for 2009 is less than $250,000, there is no issue. If you are so fortunate as to have AGI of more than that, only the part over that would be subject to the 90% recapture rate.
If you are really concerned that the as-yet-unpassed bonus tax bills could affect your severance, why don't you check with a tax professional? Has someone actually suggested this could be a real issue?
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