Anthony!":1k7tlo0a said:
For me, the whole thing is laughable and is yet another reason I stopped posting here for a while. I remember a few years ago Brady did this, back when Wilson was doing his first contract after being a rookie. Everyone said look Brady does whats best for the team etc, etc. Yet the reality was he was still getting his, only paying taxes differently. Now that it is Wilson we have a small group making lite of it like it is no big deal. I bet if it was Sherman they would be like see he is such a team guy etc. The reality is it is a big deal, he did not have to do it, and yes there is going to be some extra tax issues despite what some here are trying to say, the one rule stated here even says "can take a bigger tax bite out of your bonus payments." I just got off the phone with my Tax guy who is also a Hawks fan, and he said there are other taxes and penalties that are involved, In the end this will cost Wilson about 18% more in taxes in the end. People seem to think it is as simple as a tax bracket but it's not, different types of income have different rules, and different guidelines.
All that said, in the end, it really does not matter the reality is he did it, and it is something that a lot of people don't do, so instead of making lite of it or downplaying it, we should be embracing that he did this. As I said it if were almost anyone's on this team you guys would be all over it, when it was Brady you were all over it, Now that its Wilson you make lite of it, it's pathetic and shows whats wrong with this forum. You have a small group of people and their many aliases who attack, minimize and strike down anything positive about Wilson. How much better it would it be if we could all celebrate good things by any player on this team without having a small group ruin it. The question now is, did I actually get through to anyone or waste my time. I think I know I just hope I am wrong
I'm sorry Anthony, but after reading through all these tax-related posts I'm fairly certain you're wrong. You keep citing this "rule" that supposedly states that lump sums "can take a bigger tax bite out of your bonus payments" in order to suggest that RW will pay significantly more in taxes. However, the page where this is stated largely concerns withholding of bonuses, and the statement you specifically cite has to do with different methods of calculating that withholding. But, regardless of how much is withheld throughout the year (provided you don't pay too little), you owe the same amount of tax at the end of the year. The end of the blog post you keep citing makes this clear: "No matter what method is used to withhold taxes from your bonus at payout, don’t panic. Remember, taxes may be withheld from your bonus at a higher tax rate at payout, but when you file your taxes at tax time your actual tax rate is based on your total taxable income and overall actual tax rate, which may be lower. Depending on your taxable income, actual tax rate, and eligible tax deductions and credits you may get some of the money withheld back in the form of a tax refund."
Now, it IS true that a lump sum payment can put you in a higher tax bracket, compared to a more gradual payout, but that's not because of "different types of income." It's because of timing. If I make a total of $150k over the next three years, my taxes are going to be different depending on when I receive that money. If I take an immediate lump sum, I'll pay higher taxes than if I received the money in three payments of $50k every year. That's because the $150k I receive immediately all counts towards this year's taxes, putting me in a higher tax bracket than if I only received $50k this year. I think this timing effect is what you're referring to.
But here's the thing. The contract restructure, as I understand it, converted the remainder of RW's salary this year (and ONLY this year) into a signing bonus. That means RW receives $6.2 million immediately, instead of spread out over the next 9 weeks. Since he was set to receive that money by the end of the year anyway, it shouldn't impact his federal taxes for this year. (It's possible he has to withhold a higher fraction of that money, but if he overpays he'll just get the money back when he files.) So I really don't see how this could lead to RW paying more in federal taxes. And as others have pointed out, he probably saves a bit of money on state taxes.