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Old 09-02-2010, 02:25 PM   #21
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I suggest he visit a CPA with a tax practice. He may be changing his state of residence and the Fed tax rates may well go up. So much depends on anticipated earnings, if they are high enough he may max out his SS tax. This is not an easy call.

Oh, it is almost impossible to be both an employee and a consultant at the same time for the same entity, particularly the same tax ID #. Most of the risk is the employer's but who need IRS asking questions...
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Old 09-02-2010, 03:00 PM   #22
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Welcome to the world of 1040-ES http://www.irs.gov/pub/irs-pdf/f1040es.pdf

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Do you think I can do the vasectomies-R-Us thing despite my severe hand tremors?
Only if you code the additional service properly.
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Old 09-02-2010, 03:37 PM   #23
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Well, it's one way to bring your career to an end.
You've given me a whole new appreciation for the term "survivor bias"...
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Old 09-02-2010, 04:04 PM   #24
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You have a complicated tax situation. As you know the top hat plan can't be rolled over but can only be distributed, either lump sum, in payments if the plan allows, or via an annuity. So your employer only allows a lump sum distribution?

Until the money is distributed it is subject to claims of your employer's creditors. So, that is the risk you take with waiting. Letting it sit delays the date you have to pay tax on the money and because it is deferred comp not only will their be income taxes, you will pay FICA/medicare. So, the balancing act for you is to figure out the best years to take the money, keeping in mind the mandatory minimum distributions after 70.5. I agree that 2011 doesn't sound like the year to take the hit. It may be nice if you can take out the money bit by bit rather than in a lump sum so that is why I asked if there was such a distribution option in your plan. I have no opinion on the annuity option if your plan has one. .
Thanks, Martha. The plan only allows a lump sum payout. The FICA/MC information is new to me -- makes me think that taking it in 2011, albeit in a higher tax bracket, may not be so bad because I will have maxed out my FICA/MC tax through my employer and thus not have to pay it (maybe even both sides of it) from my 457 distribution at a later date when I am no longer employed.

I'll definitely run it by my CPA including the self-employment tax issue.
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Old 09-02-2010, 04:44 PM   #25
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Thanks, Martha. The plan only allows a lump sum payout. The FICA/MC information is new to me -- makes me think that taking it in 2011, albeit in a higher tax bracket, may not be so bad because I will have maxed out my FICA/MC tax through my employer and thus not have to pay it (maybe even both sides of it) from my 457 distribution at a later date when I am no longer employed.

I'll definitely run it by my CPA including the self-employment tax issue.
I am going to backtrack and say that I am not sure if FICA is withheld earlier. It is my recollection that FICA isn't due until there is no more risk of forfeiture under the plan. My recollection is old so I may not be correct.

EDIT: Just taking a quick look indicates that substantial risk of forfeiture does not mean that the plan is subject to creditor claims, so there is a chance that those withholding items were paid after the services were rendered. It may depend on the plan. You'll have to check with your tax adviser.
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Old 09-02-2010, 08:02 PM   #26
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There are two types of 457 which are treated differently. Years back I had a public 457 from a state university and I was able to roll that over with no problem. The current private 457 is what is sometimes called a "top hat" plan and I am required to take it no sooner than 60 days after retirment and no later than the year I turn 70.5. Att that time it is treated as ordinary income.

Though I was a full-time academic, my employment was passed through an academic hospital, hence the private designation of my 457.
You are describing the difference between 457 (b) and 457 (f) plans. Unless an academic hospital is a for profit, it should have a 457 (b) . All the "academics" I know even at for profit hospitals work for a 501 (c) 3 non profit that contracts to the hospital. They have to do it tha way to be eligible for research grants

I know of a lot of disasters with 457 (f) plans aka Rabbi trusts . You are just a general creditor of the for profit.

VII. RABBI TRUSTS
A. General Definition.
1. In a nonqualified unfunded deferred compensation plan, the employee, generally, is an unsecured general creditor of the employer subject not only to the solvency and credit risks of the employer, but also to the employer's good faith payment of benefits. As a practical matter, delay and expenses associated with litigation to enforce a right to unfunded deferred compensation against a solvent employer can substantially reduce or eliminate the value to an executive of such benefits.
Current Developments In Executive Compensation - Law Firm Lum, Danzis, Drasco & Positan, LLC Attorneys Roseland, New Jersey
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Old 09-04-2010, 03:22 PM   #27
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Hey ! If you enjoy the part time work go for it . Some of us ( me included ) would be bored stiff without a little job ( mine being ebay ) . Some people like golf,bridge or endless lunches we like getting some fun money for doing something we enjoy .
Hey, I won a total of $5 last week playing golf.
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Old 09-07-2010, 05:11 PM   #28
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Someone suggested using a tax advisor. I agree. Tax rates will most likely go up, so it will be difficult to be precise in your planning, Rich.

One thing that concerns me, personally, so I mention it to you, is tax deferred money and the dreaded RMDs. If next year you are way down in the 28% bracket you might consider getting "rid" of some tax deferred money, either by taking it as cash or rolling into a Roth. That way, RMDs will be somewhat reduced. Once RMDs begin, you have lost quite a bit of flexibility in "naming your tax bracket" (assuming you have significant deferred money).

All in all, if you'll pardon the slight envious tone here, your tax issues are probably the good news rather than the bad news.
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Old 09-07-2010, 06:28 PM   #29
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Someone suggested using a tax advisor. I agree. Tax rates will most likely go up, so it will be difficult to be precise in your planning, Rich.

One thing that concerns me, personally, so I mention it to you, is tax deferred money and the dreaded RMDs....

All in all, if you'll pardon the slight envious tone here, your tax issues are probably the good news rather than the bad news.
All good points.

Too much math. Definitely a trip to the accountant is in order.
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Old 09-07-2010, 06:53 PM   #30
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Hi Alan - any clinican using the word "terminate" when talking about / referring to a patient should be disciplined - and rightfully so.

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As I read this line I interpreted "duties" as "patients". I think Doctors should think twice before using words such as terminate.

Congratulations on moving to ESR phase 2.
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