Medical Student with Surprise "windfall" Income

[Ciguatoxin]

Objective:

• Is this a situation that I can handle myself or do I need to seek professional advice to reap maximum gains?


• To learn more about taxes

I'm a fourth-year medical student. Long story short, I was at a start-up biotechnology company that was acquired prior to medical school. In 2016, I had shares paid out to me ~50k. 25k was taxed. I used most of the money remaining money towards decreasing my existing loans 6% (principle vs interest I wasn't sure which was better to pay off since interest will eventually capitalize when I hit my grace period).

Is this just small "chump change" money and I should just TurboTax it? Or would it be advantageous to hire someone who can get a greater tax return? Sigh, I wish these interview flight costs can be refunded or itemized.

Edit: Since I make less than $150,000 is the interest deductible?

[Zaphod]

Ciguatoxin wrote:

Objective:

• Is this a situation that I can handle myself or do I need to seek professional advice to reap maximum gains?


• To learn more about taxes

I’m a fourth-year medical student. Long story short, I was at a start-up biotechnology company that was acquired prior to medical school. In 2016, I had shares paid out to me ~50k. 25k was taxed. I used most of the money remaining money towards decreasing my existing loans 6% (principle vs interest I wasn’t sure which was better to pay off since interest will eventually capitalize when I hit my grace period).

Is this just small “chump change” money and I should just TurboTax it? Or would it be advantageous to hire someone who can get a greater tax return? Sigh, I wish these interview flight costs can be refunded or itemized.

Edit: Since I make less than $150,000 is the interest deductible?

Click to expand...

This is chump change. You can pay down loans, use as emergency funds, etc....definitely no 'professional' help or this will evaporate quickly.

[hightower]

Turbo tax for sure.  The remaining 25k will just be taxed as regular income.  I am not familiar with the rules for deducting interest paid towards student loans, but Turbo Tax will let you know if it's deductible.  Just plug your numbers in and hope for the best.  There are no tricks that a tax professional knows that Turbo Tax doesn't.  The only time I recommend a tax professional is for complex returns seen when you have your own small business or complex itemizing.  And the only reason I'd recommend it in that scenario is because it would save time.  Just hand someone all of your paperwork and let them figure it out.  But, for your situation, Turbo Tax is all you need to do.

Curious about the details of this biotech company you mention...what do you mean it was "acquired."  Do you own this business?  If so, wow, that could be a big bonus stream of revenue in the future assuming it continues to stay in business.  Congrats on being business savvy at this stage of the game.  How old are you?  Sorry for all the questions, I'm just genuinely curious (we're all anonymous here so don't be bashful).

[q-school]

i'm sure it's not chump change to you, but it certainly is within the realm of what turbotax can handle.

unless there is other stuff-ie married filing separately with multiple state incomes.  even assuming that, it is still well within the realm of turbotax.  i say that having not used turbotax in over 15 years. 

don't sweat the small stuff.  i know the interview expenses are crazy, but in the big picture the importance of getting the right program to train at cannot be understated.  stay focused on enjoying m4 year and get ready for some of the busiest and best years of your life.

 

[jfoxcpacfp]

Good for you! At least start with TT - the experience will be good for you.

The only question I have (other than the unknowns about the rest of your situation) is whether you have a clear determination of your basis in the startup, i.e. the cost of the stock you sold, which will reduce your share of taxable income from the sale. That can be tricky; for example, if you were given shares in exchange for services, if the stock purchase terms had unusual requirements, if some of the shares given/purchased were included in taxable income in prior years, etc.

If the startup can report your exact basis to you and you have no questions about that, then DIY s/b fine. If you get into preparation and you're just not sure about your results, consider an experienced pro (not HRB).

As hightower said, TT will automatically calculate whether the SL interest is deductible.

[Ciguatoxin]

hightower wrote:

Turbo tax for sure.  The remaining 25k will just be taxed as regular income.  I am not familiar with the rules for deducting interest paid towards student loans, but Turbo Tax will let you know if it’s deductible.  Just plug your numbers in and hope for the best.  There are no tricks that a tax professional knows that Turbo Tax doesn’t.  The only time I recommend a tax professional is for complex returns seen when you have your own small business or complex itemizing.  And the only reason I’d recommend it in that scenario is because it would save time.  Just hand someone all of your paperwork and let them figure it out.  But, for your situation, Turbo Tax is all you need to do.

Curious about the details of this biotech company you mention…what do you mean it was “acquired.”  Do you own this business?  If so, wow, that could be a big bonus stream of revenue in the future assuming it continues to stay in business.  Congrats on being business savvy at this stage of the game.  How old are you?  Sorry for all the questions, I’m just genuinely curious (we’re all anonymous here so don’t be bashful).

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I joined a start-up that allowed me to have fully vested shares. Under the agreements of the acquirement, I would receive the shares but also any "milestones" that would be hit I had a percentage of the bonus. As my CTO said, why did you leave for medical school... In my late, twenties! Yes, I've made this account recently, but I have been reading a lot of Jim's blog and others prior to medical school! There is still so much to learn.

[Ciguatoxin]

Thanks! Not sure how to @jfoxcpacfp link you. Sounds good I'll reach out to my HR department and find out. hahaha out of curiosity what's wrong with HRB?

[jfoxcpacfp]

Ciguatoxin wrote:

hahaha out of curiosity what’s wrong with HRB?

Click to expand...

Good advice is very spotty. If you need a tax pro, you should get a tax pro. If you don't need a tax pro, DIY.

[Ciguatoxin]

@jfoxcpacfp gotcha thanks.

Out of curiosity, because this counts as income during my 4th year. I just realized REPAYE looks at 10% of disposable income on 2017's tax returns. With REPAYE I would have to start paying ~250 a month. Would it still be worth participating in REPAYE just to get the interest rates subsidized. I'm pretty sure I can pay off ~60k in loans without much trouble.

Ahh... I'm just gonna enjoy 4th year. Travel then come worry about this after.