I see a 401K withholding on my final check, but none on my ERP payout. I've heard a similar story for VSPs. That lack of an automatic withholding was not mentioned in the ERP Q&A final PDF doc. They withhold 401K contributions for APB -- why not here?
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Good input from several of you -- thanks! I think the 'supplemental income' explanation makes sense regarding the 401K. I have vacation and sabbatical payouts as well, but no withholding for 401K was done for these either -- it would seem these categories should be considered earned income and hence be subject to 401K withholding, no?
Regarding IRAs, it looks like you can contribute but in all likelihood the contribution cannot reduce your taxable income. This is because (a) we had a qualified 401K plan at least part of the year and (b) there are deductibility limits driven by your modified adjusted gross income (AGI) -- a number that will include the supplemental income from the 'big check'. Sanity check my thinking here guys, I'm hoping I'm wrong but I fear I am not.
The RSUs have already been exercised. The remaining shares after the ones sold to cover withholding is in your account. The cost basis for the remaining shares are based on the stock price of the exercise date. So you can sell those shares without incurring a lot of capital gains.
yes, all very good points @-1rjk. Thanks for sharing with folks.
My financial advisor recommends not exercising any option/RSUs this year while in the artificially high tax brackets caused by the lump sum. Also, if you take the pension as a lump sum payout, don't spend it--put it in a new individual IRA. Also, if you are on Medicare, unfortunately your premiums will be sky-high for at least a year based on your "annual income" as inflated by the lump sum. You can straighten that out with Social Security / Medicare next year.
You're welcome, @-tdz. Intel (and other companies) get blamed when they are doing as the IRS dictates. I do understand how confusing it can be for folks though. I certainly don't know it all. Far from it.
If you don't know how much you can contribute to an IRA you can google it (age and martial status come into play).
Here's another tip that may or may not work for folks that I'm guessing a lot of people are unaware of.... if you sell shares of stock that are considered "long term capital gains". You'll pay ZERO taxes IF you're in the 10%-15% tax range. OBVIOUSLY that can't be this year as you've earned a lot more pushing you into higher tax brackets this year. BUT... if you're not making much next year (or no higher than the 15% rate) then you're golden. :)
here's an article if this is something that might work for you. I'm taking advantage of it. :)
Tax rates on capital gains are determined by your tax bracket, but a significant number of people will actually pay no capital gains tax on the sale of assets held over a year! The maximum capital gain tax rate is 20 percent. But those in the 10 percent and 15 percent income tax brackets pay zero capital gains taxes. For 2015, that group includes singles with less than $37,450 in taxable income or joint filers with taxable income under $74,900.
(or Google: zero taxes on capital gains) for more articles.
Good luck. :)
Thanks (-pnc) I and several of my co-workers had the same questions - we took ERP. Anything the government can do to get more from the working class they will, as it looks like in this case.
It's me again (-pnc). If you really want to get more into your retirement plan you can contribute to an IRA if you haven't already done so. That'll at least help since that 1 yr check didn't take out 401K contributions.
Because APB is a bonus (the B part of APB) and if you go into your Fidelity NetBentefits account under contributions (or something), you'll see there's a line item option for bonuses. That's how you're able to contribute with your APB (but only if you set it up that way, otherwise a contribution wouldn't be taken out of them either).
As for the "final paycheck"... it's only a "final paycheck" to you. To the IRS it's supplimental income (or something). Hence the much higher taxes taken out of it AND why your real final paycheck didn't have your payout included in it (you got 2 separate paystubs). IRS ONLY allows 401K contributions and IRA contributions to be from EARNED income. You didn't earn that last paycheck, it was given to you. Hence no 401K contributions. I too would have liked my 401K to have been maximized but I understand why it doesn't work that way. UIt's not earned and it's not considered a "paycheck", nor a bonus for that matter.
Hopefully that helps explain that. And no, I'm not HR. LOL I'm someone that pays attention to financial matters. :) Also, I too had the same question and was disappointed when I realized I couldn't max out my 401K with that 1 yr salary check. Bummer....
If you are asking for money please go to the nearest freeway off ramp loser