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  • Another signing bonus question

    Signed a contract in December and received a 20k signing bonus check late December 2021 as a 1099 NEC. I don't start for company until later 2022. I've read multiple other posts in years past that say 1099 NEC is the way to report but I'm owing 6K in taxes now. What can I do at this point to lower my tax burden before filing? What can I claim as "expenses" from the sign on bonus? Could I open any retirement accounts to save money? I already maxed out my Roth for 2021.

  • #2
    You can set up and contribute to a solo-k. If you did not max your employee deferral to your qualified plans with your employer(s) in 2021, you can contribute up to $19,500 (net profit from 1099-NEC comp - (1/2 of related FICA tax)). Otherwise, you can contribute employer profit sharing of 20% of equation I posted. I don’t believe there would be much, if anything, to deduct as a business expense against a signing bonus, unless you were OOP some costs for the interview and hiring process.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Originally posted by jfoxcpacfp View Post
      You can set up and contribute to a solo-k. If you did not max your employee deferral to your qualified plans with your employer(s) in 2021, you can contribute up to $19,500 (net profit from 1099-NEC comp - (1/2 of related FICA tax)). Otherwise, you can contribute employer profit sharing of 20% of equation I posted. I don’t believe there would be much, if anything, to deduct as a business expense against a signing bonus, unless you were OOP some costs for the interview and hiring process.
      Thank you for your reply! I've read your other comments over the years regarding similar scenarios and they've helped. I've gotten my EIN and opened a solo 401k at Vanguard.

      So I had a 20k bonus on 1099. After deductions for travel, suit, license, my net profit is 18851. Is this the number that I subtract /2 FICA tax (15.3%)? Then do I do a 20% employer contribution and have the employee contribution separated? I had just under 5k of other 401k contributions with other W2 work, which would leave me with 14.5k more employee contributions for the year. I also see 18851 multiplied by 0.9235 to get 17409 on my schedule SE. Is that the subtraction for 1/2 FICA tax that I should base my 20% employer and rest employee contribution towards!

      Thanks to whoever is good at math and can help!

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      • #4
        Glad I’ve been helpful - can’t tell you how much that means! You don’t need to be good at math. Just input the correct numbers in the correct blanks in TT and it will spit out your allowed PS contribution.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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