Comments on: Stop Paying Taxes on Work Bonuses—Legally

By: Malisa Wollmer

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By: Jay

Jay — Wed, 29 Jul 2009 01:40:41 +0000

I work for a bank as a teller, and based on how our scorecard turns out both individually and as a branch, we can be eligible for a bonus, up to $150/month. I have started putting that in to an IRA, and may see if my company will put it in to my 401K rather than me writing a check to my other IRA I have through a seperate company.

By: Lyn

Lyn — Fri, 19 Dec 2008 17:38:30 +0000

Unfortunatly, this is not entirely correct. Contributions to a 401(k) are not exempt from FICA and Medicare taxes. These tax amounts are considered taxable income for Federal, State and Local income tax withholding purposes. So the calculation of FICA and Medicare taxes, gives rise to the need for income tax withholdings. Even claiming exempt, it is just not possible to defer 100% of your pay. At least some of it must always go towards taxes.

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By: Karina Harris

Karina Harris — Sun, 26 Oct 2008 00:56:10 +0000

This is some really great information, thanks for the tip.

By: Frank

Frank — Fri, 24 Oct 2008 19:22:46 +0000

Some will say that if your APR on your debt is less than you think you can get in the market then invest. Personally, I think there is a huge physiological boost to have debts paid off and that’s what I would do.

By: Amy

Amy — Fri, 24 Oct 2008 19:17:49 +0000

This is something that my company allows and I think I’m going to seriously consider it this year. I’ve been wanting to invest more while everything is on sale. On the other hand I’m really close to paying off my last consumer debt and putting the bonus towards that instead would cut the amount owed in half. What to do, what to do?

By: Dawn

Dawn — Fri, 24 Oct 2008 17:58:14 +0000

My company won’t do it, unfortunately, because they do a match and it would make their accounting difficult. It is an interesting idea though!

Not that I think I’ll be getting a bonus this year – it has just been that kind of year, sadly.

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By: Frank

Frank — Fri, 24 Oct 2008 14:02:43 +0000

As I understand it, it’s basically up to whoever handles the checks for your company. Just like they put money into your 403(b), the same process would be done for your bonus. In fact, I would think a separate check would be even easier for them. Technically all a bonus is profit. Think of it as a raise, employers can put more money into your 403(b) if you get a raise upon your request, why not the bonus?

By: sarameshell

sarameshell — Fri, 24 Oct 2008 13:15:33 +0000

This is legal but as I understand you aren’t supposed to do it a lot, but I changed my dependents on my taxes to 9 before they gave out bonuses and changed it back after I got my bonus (August). That way they didn’t take out as much in taxes had I left the dependent number it originally was. Unfortunetly we can’t put our bonuses directly into our 403b (non-profit’s version of 401k) because it’s a written check. But to have it go directly into a 403, will most employers put the money in there instead of writing a check?