Signing Bonus Question...

[TysonCook]

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Signing Bonus and Tax Question:
With my new contract I negotiated a signing bonus, which I haven't taken yet. The group offered me two options:
1)Take the $ as an outright payment (and therefore taxable).
2)Submit reciepts and be reimbursed as a business acct. (not taxable?).
3) Mixture of the above

I don't plan on moving (no moving expense), and don't have a lot of other expenses (business), this year, next year I plan on moving, buying a computer, and taking boards (i.e. business expenses).

Any suggestions on how to take the $?

(Married filing jointly, no children, combined income ~$90k, graduating in June)

 

[nontrdgsbuiucmd]

I'd go with number one for several reasons;

1) $$ now versus later -- stuff happens when employed at a company; a relative who's a physician had some pretty bad things happen & they ultimately left the practice after a few years. I'd go with taking the money soon after it's offered, just in case.

2) receipts seem like they'll be small -- sure you can have your cell phone reimbursed, or something like that, but it seems like it'd take many years to get reimbursed much $$. From the sounds of things, if you're starting soon and then moving a year later, I'm guessing you'd be moving within the same geographic area? Methinks the IRS would not look kindly if your employer is audited and they pay for you to relocate from an apartment to a house in the same metro area.. IRS's probably be fine if your employer reimbursed you to move to the city where the practice is, however. The relevance is that depending on the size of the practice, it's possible the practice is going to come back to you if they're hit with a big tax bill. I'd stay simple and steer clear of this area.

Computers are way cheap, say they buy you a $1000 mid-grade PC and pay for your cell phone for a year vs. a 10K signon bonus or whatever is being offered.. I'd still suggest going with the cash now.

 

[schwab]

Signing Bonus and Tax Question:
With my new contract I negotiated a signing bonus, which I haven't taken yet. The group offered me two options:
1)Take the $ as an outright payment (and therefore taxable).
2)Submit reciepts and be reimbursed as a business acct. (not taxable?).
3) Mixture of the above

I don't plan on moving (no moving expense), and don't have a lot of other expenses (business), this year, next year I plan on moving, buying a computer, and taking boards (i.e. business expenses).

Any suggestions on how to take the $?

(Married filing jointly, no children, combined income ~$90k, graduating in June)

I'm not really sure what option 2 means. The only signing bonus I've ever heard of was simply an additional amount in your first paycheck (which sounds like number 1).

What exactly would they reimbursing you for as a bonus?

Sorry - provide a little clarification and I'll add my two cents.

In general, though, if ValueOfCashBonus*(1-0.25) > ValueOfTaxFreeReimbursement, then go with the cash. Otherwise, get reimbursed for whatever it is that they will reimburse. The (1-0.25) takes into account an assumed 25% tax rate for the taxable cash.

 

[TysonCook]

Thank you. I had the group set it up as a business reimbursement acct, so I could get my licensing, computer, scrubs, books etc reimbursed instead of a cash bonus which had more tax penalties.

All is well, and I appreciate the help!

Getting a real job is quite a bit like a whole new series of learning about the real world 🙂