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.
"Up sluggard and waste not the day, in the grave will be sleeping enough." Benjamin Franklin