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HCE coming fast - need some tax help
Old 10-15-2014, 04:21 PM   #1
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HCE coming fast - need some tax help

I may trip the $115k Highly Compensated Employee trigger before year end. I thought I was okay but between a few small commission checks and cash in lieu of healthcare I am dangerously close. Now comes the news of upcoming merger and HR says we may all be getting a raise effective November 1st. We also typcially would receive a $500-1000 year end bonus, but with all the hours we are putting in on the merger I suspect the Board of Directors will feel compelled to give a larger than usual bonus.

So at the risk of getting hit with rotten tomatoes I am worried about the consequences of having a large part of my 401k contibution taken out and dropped back on my plate as a taxable event - I know I shouldn't complain as I am blessed beyond my wildest dreams to be making what I make, but I fear this is going to have ripple effects that will be very very bad.

I dont know what the average employee contribution was in the previous year but believe it is around 6-7%; and I have been putting in 15% of my pay.

If I go above the $115k cap and get the 401k back I assume it will increase my gross pay on IRS 1040 and with my pay plus my wife's we will then exceed the joint filing max income that allows us both to max out our Roth IRA! I am hoping I am wrong on this but fear the worst.

The obvious solution is to beg my employer to NOT give me a raise in 2014 and defer any bonus to 2015, but for merger related accounting reasons I think they will want to do in it 2014. Currently employer doesnt offer a deferred compensation plan; talk of that for 2015 but not avial ble in 2014.

Does anyone have any creative ideas to avoid this impeding Shat-storm?

Also assuming 2015 will for sure put me over the $115k cap, my plan would be to max out wife's 403b to try to save the Roth option.
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Old 10-15-2014, 06:25 PM   #2
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Deductible IRA? HSA contribution? Some time off without compensation?

When the bonus is paid shouldn't affect the merger accounting since it would be accrued anyway.

Also, definitely max out DW 401k.
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Old 10-15-2014, 07:13 PM   #3
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Originally Posted by pb4uski View Post
Deductible IRA? HSA contribution? Some time off without compensation?

When the bonus is paid shouldn't affect the merger accounting since it would be accrued anyway.

Also, definitely max out DW 401k.

+1

Max out wife's 403b.

Ghat should be enough right there. tIRA to Roth conversion if you don't qualify for Roth IRA.
I assume you can't change HSA contributions without life-changing event.
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HCE coming fast - need some tax help
Old 10-15-2014, 09:24 PM   #4
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HCE coming fast - need some tax help

I jack up my 401k contribution to over 25% to stay under the limit that allows me to max out both my wife and my own ROTH contributions. She does the same via 403b salary reduction.


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Old 10-16-2014, 08:21 AM   #5
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With my company the overage is refunded in the next year. If too much is deferred in 2014, you don't get it back until 2015.

You receive a 1099 to file with your tax year 2015 (which is filed in 2016) return adding the money back as income.

And yes you are correct on whichever year the 1099 states, the money will get added to your income and could put you above the limit for a Roth contribution.
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Old 10-16-2014, 12:26 PM   #6
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Originally Posted by SoClose View Post
With my company the overage is refunded in the next year. If too much is deferred in 2014, you don't get it back until 2015.

You receive a 1099 to file with your tax year 2015 (which is filed in 2016) return adding the money back as income.

And yes you are correct on whichever year the 1099 states, the money will get added to your income and could put you above the limit for a Roth contribution.
That would be good - if I can push it to 2015, employer should have a deferred comp plan in place. Then I just need to put all that (plus more) into the deferred comp plan. Best news all day
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Old 10-16-2014, 12:29 PM   #7
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Deductible IRA? HSA contribution? Some time off without compensation?

When the bonus is paid shouldn't affect the merger accounting since it would be accrued anyway.

Also, definitely max out DW 401k.
we are the entity that is going to cease so they want to get all expenses under the old company.

I'd love to take time off without pay but with the merger all VP levels are looking at vacation freeze and about 60-70 hour weeks---eek!
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