Re: Possible IRA Strategy
- From: "Archmedes" <me@xxxxxxxxxxx>
- Date: Fri, 1 Aug 2008 20:50:45 -0700
"Dimitrios Paskoudniakis" <greekgod@xxxxxxxxxxxxx> wrote:
"P. Maffia" <pmaffia@xxxxxxxxxxxxxx> wrote in message news:4OOdnTsjbId6BA7VnZ2dnUVZ_tjinZ2d@xxxxxxxxxxxxxxxxxNo matter what pay schedule a company uses, it must pay you for every day worked. Your scenario is pure, unadulterated BS.
Let me rephrase. Bi-weekly payees do not receive pay for work in the same calendar year, hence tax year, for the portion of work in a pay period that covers late December into January of the succeeding year. Yes they receive payment for that late December work, but in the next tax year.
Say the last pay day is December 29. Work on December 30 and December 31 are part of the next pay period that ends on January 12, so work performed on December 30 and 31 is not paid until January 12, and those dollars are counted as income in the succeeding year. Since there are 364 days in a bi-weekly cycle, but a year is 365 (or 366 in leap year) days, the next year would have a last pay day say on December 28, with later December days paid on say January 11. It slips one or two days each year - one day in a non-leap year, two days in a leap year, the difference between 364 days in a bi-weekly cycle and the actual number of days in that year. After about 11 years you've slipped an entire bi-weekly pay period. After about 11 years, you squeeze in one additional paycheck in the same year. In this case, that pay that started on January 12 one year, then January 11 the next, then January 10, then January 8, and so on, finally gets to December 31, so there is a year about once every 11 years where there is a 27th paycheck. But, in that year, the first paycheck, say on January 2, is actually comprised mostly of work the prior year (late December).
So yes, you are always paid for work performed, but because the pay is on a "364-day year", once every 11 years you get a paycheck for 365 plus 13 days of work (from the prior December). If you were paid semi-annually, you would always be paid in December for work performed in December, so your pay would be in the same tax year. For bi-weekly payees, you're paid on a 364 day cycle each year for about 10 years, then to make up for it, your paid an additional paycheck once about every 11 years. In that year, your income in a fixed tax year is your salary x 27/26.
This can cause the tax problems I mentioned.
My scenario is not BS. I'm living it.
Tell it to these people:
http://news.yahoo.com/s/nm/20080801/bs_nm/usa_economy_jobs_dc_4
.
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