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Directing Your Lump Sum to Your Existing or New Retirement Account

Consider increasing your withholding (W-4).

You will receive your lump sum payment in your November 30 paycheck. The lump-sum will be a multi-thousand dollar increase to your paycheck for one month. There are tax implications to such an increase and you have options you may want to consider.

If you do nothing, the lump sum will be subject to all the same tax witholding as your normal income. If you redirect your lump sum to your SRA retirement account, you can avoid federal and state income tax and only pay FICA taxes.

The Benefits Office has prepared following document for house officers:

2019 HOA SRA Kit

Please see the following chart for this year's Lump Sum Payment

 Lump Sum PaymentLump Sum Less FICA
HO 1$5,272$4,868
HO 2$5,562$5,136
HO 3$5,837$5,390
HO 4$6,143$5,673
HO 5$6,457$5,963
HO 6$6,785$6,266
HO 7$7,122$6,577
HO 8$7,464$6,893

If you do not want to redirect your lump sum to a retirement account, you may want to consider adjusting your W-4 allowances before your November paycheck. Doing so may help you avoid having too much money withheld by the IRS. Please use the Withholding Calculator on the IRS website to figure this out. If done right you can have more money in your pocket in November instead of a large tax return in April. You can adjust your W-4 at any time in Wolverine Access. If you increase the number for withholding to 5 or 6 for November, it will automatically revert back in December.  (This is a new feature this year.)  Each person's situation is different, please consult your tax professional before making any changes.