KCOC wrote:

- quote -

Theory and practice differ.

In THEORY, you could give your old employer a new W-4,
and they will withhold according. However, that would
be wrong, according to the W-4 instructions, and would
probably not be effective, as the old employer might
record it as a "bonus" with Federal withholding set at
a flat 25%.

However, if you expect to be below the 25% tax bracket
in 2005, you may adjust your W-4 for the new employer
accordingly. This MAY be wrong, according to the W-4
instructions, but I think there's a place to allow
for non-wage income subject to withholding. In addition,
in practice, the only penalty for filing an improper
W-4 is the estimated tax penalty, equivalent to
interest at around 5% for the amount underwithheld.

Also, if you expect your total 2005 wage income
to exceed $90,000, and your old employer declares
your bonus to be 2005 income for OASDI purposes
(I haven't researched whether that declaration
would be correct), you may allow for the excess
OASDI credit (6.2% of the amount of total 2005
wages from each employer, allowing only a maximum
of $90,000 from each employer) on the 2005 W-4.

If you're in a state with a state income tax, the
same rules apply. (Including, in some cases, the
OASDI allowance -- California SDI is similarly
limited.)

Be sure to adjust your W-4 back for 2006.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

I know this topic has been covered through and through now,
but I'm new to the game. I have a basic understanding that
I'm going to lose almost half of my bonus check when it
comes, but my question is a little different:

I am leaving my job at the end of 2004. My bonus will come
in March 2005. Can I change anything with my current
company (the one I'm working for in 2004) to get more money
from the bonus check I will eventually receive in 2005? The
job I begin in 2005 I will claim 2 on the W-4 and don't see
a reason to change that.

Thanks

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->