Deferred Compensation is a strategy where a portion of an employee’s income is set aside, or “deferred”, to a later date. This strategy allows employees to avoid recognizing income in the current year, and instead defer that income to a future year. In many cases, the taxes due on the income are also deferred to the future period in which the income is received.
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An Employee Stock Purchase Plan (ESPP) provides employees an option to purchase stock in the company they work for at a discount below market price. Understanding how these plans work, including the tax implications, will allow an individual to make an educated decision on whether to participate in the plan and how much to invest.
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A 401(k) plan can be funded through several avenues including contributions, a transfer, and a rollover. In this article, we will discuss the key differences between a rollover and a transfer along with the key steps required to avoid costly penalties and unfavorable tax consequences.
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During the year 2020, you've probably experienced exhilarating highs and painful lows as you've looked at your retirement account balance. Living in this time of the pandemic has been challenging in so many ways, including financially.
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Employee Stock compensation is one of those things that you know you should be doing something with but really only give it any thought when you are forced to do something, like approve an option grant. Even if you aren’t checking every day, you should at least review your total employee stock plan once a year.
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First off, congratulations! You have sacrificed, saved, and worked hard to be in the position you are today. But before you retire and enter an exciting new chapter of life, let’s look at some planning items to consider when it comes to selling your employer stock options in the year of retirement.
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With so many publicly traded companies located here in Minnesota (United Health, Target, Best Buy, Medtronic, US Bank, General Mills) it’s not surprising that we often have questions about the NUA rule. Anyone who has worked with one of these companies over a significant period of time may be looking at a large concentrated stock positions with a potentially huge tax burden in the near future. The NUA rule may help alleviate some of that burden but you have to do it the right way.
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Minnesota has a lot of large publicly traded employers. United Health, Target, Best Buy, Medtronic, US Bank, General Mills, are some of the biggest. Typically, these companies will use other forms of compensation to attract and retain employees. Restricted Stock Units (RSUs) are one of the most common.
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Whether you just got fired, are planning to leave your employer to pursue another opportunity, or ready to retire, you need to make sure you understand what happens with your employee stock options as this could have a huge impact on your tax situation and your retirement plans.
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Those with charitable inclinations along with substantial employer stock positions have a unique planning opportunity to reduce taxes, risk, and fund future charitable goals. Utilizing a Donor Advised Fund in conjunction with employer stock sales can help accomplish this.
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Have you accumulated substantial employer stock in the form of RSUs over the years? Does this employer stock position represent a substantial portion of your overall net worth? Are you trying to understand the tax impact of selling these to reduce risk and diversify the proceeds? If you have answered yes to any of these questions below are three sales strategies when it comes to selling your RSUs.
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Weather you just started receiving employer stock as part of your compensation package or have been receiving it for several years, having a plan in place for managing this critical component of your income and net worth is essential.
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Early retirement is a goal for many Americans but accessing Social Security prematurely can cost retirees thousands of dollars annually. There are some important reasons to consider waiting until you are 67 or older before tapping into your Social Security benefits, even if you plan to stop working and retire well before then.
Read MoreIf you hang out long enough on personal-finance discussion forums, you’re bound to see this question posed: Will Congress ever repeal the Roth IRA?
Before we explore possible answers, let’s review the features and benefits of the Roth.
Read MoreConfused by the U.S. tax code? You’re not alone. Figuring out deductions, credits, and exemptions rank as some of the most complicated aspects of understanding taxes.
Read More“Save as much as you can for retirement.”
That’s the message that has been drilled into the mind of every American worker for decades. There’s something to be said for that, of course. Financial security is important to all of us.
Read MoreWhat does “SPY”, engineering during WWII, and spiders have in common?
If you have no idea, you are not alone. This is a tricky question. And the answer is a name you probably won’t recognize.
Read MoreThere are two big problems with “nanny tax”.
One, most people who hire a babysitter don’t believe that they could be affected by “nanny tax”. It seems like it should only apply to families that have a live-in au pair or a full-time nanny. You just have a sitter cover an occasional date night and take care of the kids during the summer break. That doesn’t call for dealing with taxes, does it?
Read MoreHaving too much appreciated stock in your portfolio may look like a great problem to have. It validates your good sense for having chosen those investments in the first place. It gives you a warm and fuzzy feeling when you open the quarterly account statements. Why is that a problem, exactly?
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