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You Are Being Paid on a Base Pay, Commission, and Bonus

question 109

Essay

You are being paid on a base pay, commission, and bonus incentive compensation package. The economy can have a lot to do with how much you earn in a year as well as your personal efforts to improve sales and increase your customer base. Your employer is very flexible as to when and how it makes incentive payments to you. For instance, it can switch between bonus and pension contributions as well as provide you with stock purchases and delay bonus disbursements until the new calendar year.
Recent forecasts indicate that the economy will slow down next year and you have a sizable commission cheque and bonus payments owed to you this year. Under these circumstances, what would be your tax planning tactics to reduce taxes?


Definitions:

Annual Coupon

The interest payment distributed each year to holders of bonds, generally represented as a percentage of the bond's principal amount.

Maturity

The date on which the principal amount of a note, draft, acceptance bond, or another debt instrument becomes due and is repaid to the investor.

Market Interest Rate

The prevailing rate of interest that is available in the market for savings, loans, and investments.

Noncallable Bonds

Bonds that cannot be redeemed by the issuer before their specified maturity date, offering protection to bond investors.

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