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Question: How can I handle deferred compensation?


With respect to deferred compensation, you have two choices:

1. Income only.

You might enter a description of the deferred compensation as a write-in at the bottom of the Non-Wage Income section, but enter no amount.

Then click "more info," and override the zeros in the specific payout dates at the bottom of the screen with the payouts anticipated to occur in each payout year.

These will be taxed as ordinary income.

You may override the tax values on the View/Edit Taxes report, in that year, if necessary.

This approach will not show the deferred compensation as an asset.

2. Asset and Income.

It is a bit more complicated, but you can enter the deferred compensation as a "Cash & Investment" asset, showing no income and no appreciation.

Then on the "more info" screen, you can override the "View/Edit Annual Income" to show the payout years' incomes.

And also override "View/Edit Annual Value" to show the declining remaining value at end-of-year. So if there were three payments of $50,000 in years 2015, 2017, and 2019, the View/Edit Annual Value would look like this:

2014: 150000

2015: 100000

2016: 100000

2017: 50000

2018: 50000

2019: 0

Thereafter: 0

The table above is showing the asset value at the end of that year after the payments -- not the payments themselves.

The asset starts with a value of $150,000, which is the total of future anticipated payments.

As the payments are made, the value goes down. (You are entering the payments separately, in Non-Wage Income.)

So if there is a $50,000 payment in 2015, the asset value goes down from $150,000 at the end of $2014 to $100,000 at the end of 2015.

The payment of $50,000 in 2017 bring that asset value down another $50,000 by the end of 2017.

And the final payment of $50,000 in 2019 means that there are no more anticipated payments, and the asset of Deferred Compensation is now worth $0.

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