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ShawnA
ShawnA, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
Category: Tax
Satisfied Customers: 2884
Experience:  CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
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Company is doing some fancy dance around a contract that promises

Customer Question

Company is doing some fancy dance around a contract that promises to reimburse for any tax implications on a loan (really a moving bonus disguised as a loan). Here is the contract language in question:
"The company will annually "gross up" the payments to Otteman in order to cover the income and payroll tax impact and interest payments associated with the loan."
However, they have been withholding $3,726.31 from his paychecks annually to cover the costs of payroll taxes.
In response to my inquiries they sent a spreadsheet explaining why the current arrangement is in our favor: "Though you are having to deduct $3,726.gtfrom your paycheck, you receive the following benefits:
The deduction from above for your contribution to your 401K: $1137.11
The company matching that goes into your 401K: $1137.11
Your social security deduction that is NOT an extra tax (See NOTE 1): $1762.53
Total amount NOT reducing your cash to you by year end: $4036.75
Benefits over paycheck reduction: $310.44
At the end of the year you have this much more to your credit than if we had not done any taxing on your
loan forgiveness. So you come out a little more than whole."
The fact that we are reducing our total amount of income that is taxable for social security and the fact that we are contributing to our 401k through this program, does not seem to me to be adequate reimbursement for tax payments as outlined in the contract.
Should I seek out a lawyer?
Thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  ShawnA replied 1 year ago.
Hello. My specialty is focusing on YOUR Financial needs. Financial Planner/Business Owner for 20 years. Retired CPA
I don't think you need (at this point) an attorney. What you need is a CPA to review what is going on and then, depending on what he finds maybe a sinple letter from him or THEN an attorney.
I will offer you a chance to discuss this by telephone. Please let me know if you are interested.

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