Taxes on the AGE Loan-Bonus

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Aug 6, 2007 9:45 pm

From a time value of money perspective, it makes sense to take the full retention package up front......as long as you ignore how it will impact the taxes withheld on your next 68 paychecks.  Has anyone figured out how much the withholding for the phantom income will eat into their paychecks for the next 6 years?  On a non-fee month, the tax withheld could be a substantial portion of your income!

Aug 6, 2007 10:21 pm

Yeah? So?

Aug 6, 2007 11:48 pm

How is it differnent then getting taxed yearly on teh same portion? It isnt...the diff is that tehy keep your $$ for the better part of 6 years

Aug 7, 2007 8:59 am

FC's who choose the loan-bonus arrangement should be aware of the monthly tax impact on their pay checks. In the example of a $300,000 retention loan/bonus, roughly $5085.77 will be taxed each month. In a 42% combined state and Federal bracket, that is $2135 in taxes advanced to the FC against his production that month. He or she will have to net $5085 to cover it----or gross about $13,000 at 39%.

Aug 7, 2007 1:15 pm
shredder:

FC's who choose the loan-bonus arrangement should be aware of the monthly tax impact on their pay checks. In the example of a $300,000 retention loan/bonus, roughly $5085.77 will be taxed each month. In a 42% combined state and Federal bracket, that is $2135 in taxes advanced to the FC against his production that month. He or she will have to net $5085 to cover it----or gross about $13,000 at 39%.



so it's just like an upfront deal...

Aug 8, 2007 8:27 am

Brokers getting 300m plus retention dont really have a problem grossing $13000/month. Thats why they're getting the 300m plus retention in the first place.  

Aug 8, 2007 9:43 am

actually, we reworked the numbers and the B/E is actually about 1/2 of the gross. Bottom line, you need about $7100 gross to cover taxes in the $300k example. As Bache implies, not an issue.