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Author: xraymd Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Deferring income - smart or not? Date: 11/26/2003 9:46 PM
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Greetings, all, I am writing to ask about shifting some end-of-year income into 2004. My salary got a turbo-boost this year once I started working in late February as a primary care physician but my start date was late enough in 2003 that with a deferral of my last two paychecks into 2004, I protect my ability to make a full $3000 Roth contribution in 2003 for the final time, as I am now in the income bracket that would prevent it.

I am single, no dependents, no real estate, no deductions (though I am keeping my eye on my state tax to see if at some point it will lift me beyond the standard deduction and make it pay for me to file Schedule A - but not this year). My accumulated gross wages for 2003 to date are $93,819.68 and I have a few hundred (less than $500) in interest earnings. Not eligible for any deductions that further reduce my AGI, though I will be filing Schedule C and SE from when I was working as an independent contractor prior to February, and there may be $1000 or so decrease in my AGI from that.

I am thinking seriously of deferring the December gross of $9230.76 into January 2004. My base pay is $120K and I am not sure whether or not I will receive a bonus. This would bring my gross in 2004 to something still underneath the next tax higher tax bracket which would be above $143K for a single person (I don't think my bonus would be anything remotely resembling $13K or so).

So I am hard pressed to see any downsides for shifting income forward. Can anyone illuminate for me the hidden disadvantages of doing so (or even the hidden ADVANTAGES)? I think there would be other ways to divert income towards tax-favored retirement savings but I definitely know of the advantages of making a Roth contribution and, unless advised against it, thought it would be prudent to protect the opportunity to do so one final time while still at an AGI which allowed it. Thanks for any input!

xraymd
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