Some Wall Street Firms May Pay Bonuses Early to Avoid Tax Hike

It seems that Wall Street isn't planning to wait patiently to see if Congress will extend the Bush tax cuts to all Americans. Instead, firms are planning on giving bankers and traders their big bonuses that would have hit in 2011 a few months early in late 2010 to avoid the new rates that may be imposed on high earners. Lauren Tara LaCapra from TheStreet reports:

Some big banks pay bonuses before year-end, while others delay the holiday gift til early January. However, the sunset of a Bush-era tax break may cause them to award compensation in 2010. "Executives are thinking about deferred compensation choices -- deferring bonuses and income, which they can choose to do," says Greg Rosica, a tax partner at Ernst & Young. "People who have stock options are considering the strategy with that. At companies paying out bonuses, early January vs. December can be a very different tax situation for the recipients."

Since lots of Wall Streeters receive the majority of their compensation in the form of their annual bonus, this could make a huge difference. Anyone pulling a $500,000 cash bonus forward into 2010 from 2011 would save around $22,500 in taxes.

Read the full story at TheStreet.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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