You’re tempted to open your red envelope and claim your generous holiday bonus before December ends. And considering that it’s the Christmas season, it does make sense on the surface. But taking that holiday bonus before 2020 rolls around may be one of the worst financial moves you can make, according to the latest tax audit reviews. Let’s take a look at why.
Although you might be tempted to grab hold of that extra bonus cash at the end of the year, it may make more sense to delay the receipt of your bonus until January. Why? Because if you get a nice windfall at the end of a tax year, this sweet treat may come back to bite you at tax time. That’s because that extra money could you push you to a whole new tax bracket, which means that Uncle Sam will take more of your money when you file your tax return.
Note that in some situations, receiving a bonus in December will have no impact on your tax bracket for that year. A tax professional can advise you on whether taking your bonus around Christmas time will have an adverse impact on you tax wise. If so, deferring a holiday bonus would likely be a wise move for you.
Also, keep in mind that some employers will force you to take your year-end bonus at the end of the year. In other words, you don’t have the option of waiting for your bonus. However, other companies do give you some control in this area, in which case you should ask your employer to grant you your bonus in January rather than in December.