Dick Adams wrote:

- quote -

Actually the Congress changed the law and wrote it into the
IRC--it wasn't the IRS that changed its position <grin> but
rather Congress changed the law.

Otherwise the key issue is whether you made the choice
*before* you had any right to the funds. So, for instance,
if you agreed before performing the services to take your
bonus the next January, that's very likely going to escape
constructive receipt. Note I say "very likely" since the
whole thing is very much a "fact based" analysis, and the
courts are not likely to respect a transaction where there
was a pained argument about why the taxpayer didn't have a
right at that instant (your employer agrees to defer the
bonus five seconds before it writes out all the other
employees' bonus checks who want them now--and then argue
that it wasn't technically "required" to be paid, though
everyone knew it would be paid based on no additional services).

--
Ed Zollars, CPA
Phoenix, Arizona

================================================== ==========
Moderator:
Mark this date on your calendar. Ed and I finally agreed
upon a constructive receipt issue!
================================================== ==========

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sethb[at]panix.com (Seth Breidbart) wrote:

- quote -


- quote -

ammortized payouts, that the amount to be paid is uncertain until
the election is made, at which time there is no more right to change
your mind.

Stu

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sethb[at]panix.com (Seth Breidbart) wrote:

- quote -

It's a constructive receipt issue!!! Ed may be here soon!

I agree with you because it is no different that deciding
if you want to be paid on the 1st or the 31st of the month
for previous work. Your employer should have a written
policy in place and it should include a statement that once
you make your choice, you cannot change it.

As for lotteries, that is the way it works. It use to be
that you had to make the choice at time of purchase. The
Lottery Commissions found that too cumbersome and got the
IRS to change its position.

Dick

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Stuart O. Bronstein <spamtrap[at]lexregia.com> wrote:

- quote -

Isn't the rule on that, rather, "if there was a time during
2003 that he could have received it immediately"?

For instance, if in January 2003 I agreed with my employer
that my 2003 bonus (amount then unknown, of course) would be
paid in 2004 rather than 2003, then it wouldn't be taxed
until 2004, even if I could have specified that it be paid
in 2003. That would be because I picked the date before I
had the right to receive it.

I've also noticed that some lotteries apparently let the
winner choose whether to take cash or an annuity after
winning; how does that work? Why wouldn't he be responsible
for taxes on the cash payout immediately? (I'd guess that
either there's an exception (unlikely) or the rules provide
some delay for the cash payout, triggering the rule above.)

Seth

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Thanks Helen, Stuart, UncleFrank, Skip and Arthur for your replies.

Sam

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S.V.Proff wrote:

- quote -

Even if they could -- it might still be taxable in 2003,
under the doctrine of constructive receipt. I think
your best bet is to consider additional deductions.

If you expect to be eligible for one of exemptions
from the 10% penalty for early withdrawal from an
IRA, you might consider contributing to an IRA for
2003 and withdrawing the amount in 2004. In the
same circumstances, you might see if the company
would contribute the entire amount of the check
to your 401(k).

Exemptions include:

Unreimbursed medical expenses: Basically, the amount
that would be deductible on line 4 of form 1040
Schedule A for 2004.

Medical insurance: The amount paid during 2004
for medical insurance, if you are eligible for
and receive unemployment insurance for 12 weeks.

(I assume you cannot claim both of these for the
same year, but publication 590 doesn't make it clear.)

Higher education expenses: This seems unlikely to
apply, but it's possible.

--
This account is subject to a persistent MS Blaster and SWEN attack.
I think I've got the problem resolved, but, if you E-mail me
and it bounces, a second try might work.
However, please reply in newsgroup.

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- quote -

From a technical standpoint, even if the employer didn't pay
until 2004 under the circumstances, it would be taxed in
2003 if he could have received it during this year.

Stu

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- quote -

You might check with the 401k and ask if they will permit
lump-sum deposits. We do this often with State employees
here in SC; my guess is that your chance is less in private
sector. But I'd ask.

Also don't forget possibility of deductible spousal IRA.
(If spouse is eligible.)

Also, speaking of spouse, you and spouse should immediately
max out retirement plan contributions for balance of year.

-HW "Skip" Weldon
Columbia, SC

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"S.V.Proff" <dontfixit[at]hotmail.com> wrote:

- quote -

Seeing that this amount will be reflected on this years
W2 you may want to Increase 401k or other retirement
contribution if available.

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- quote -

Not much. The year you receive the check is the year it is
taxable. If the employer will not hold it until next year,
it is taxable in 2003 no matter what.

Helen, EA in PA
Member of The Tax Gang
President, PA Society of Enrolled Agents
Campaigning for NAEA Board of Directors - Looking for YOUR vote

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I was giving a 30-day notice the other week. At the end of
thsi period I will be giving a lump sum severence day equal
to several months of wages.

I'd rather report this in 2004 to IRS. Reporting it this
year will push me into higher tax brackets...

I asked the employer to give me the check in 2004 in a few
weeks but they say they cannot do that.

What else can I do?

Thanks,

Sam
(Please post your replies here. My e-mail address is spam proofed.)

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