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Essential Year-End Tax Strategies for PayPal Employees: What You Need to Know Before 2023

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Here are some things for PayPal employees and retirees to consider as they weigh potential tax moves between now and the end of the year.

1. Defer income to next year
PayPal employees must consider opportunities to defer income to 2023, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rent, and payments for services. As a PayPal employee, doing so may enable you to postpone payment of tax on the income until next year.

2. Accelerate deductions
PayPal employees and retirees should also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2023) could make a difference on your 2022 return.

3. Make deductible charitable contributions
As a PayPal employee, if you itemize deductions on your federal income tax return, you can generally deduct charitable contributions, but the deduction is limited to 50% (currently increased to 60% for cash contributions to public charities), 30%, or 20% of your adjusted gross income (AGI), depending on the type of property you give and the type of organization to which you contribute. (Excess amounts can be carried over for up to five years.)

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4. Bump up withholding to cover a tax shortfall
As a PayPal employee, if it looks as though you will owe federal income tax for the year, consider increasing your withholding on Form W-4 for the remainder of the year to cover the shortfall. Time may be limited for PayPal employees to request a Form W-4 change and for their employers from PayPal to implement it in time for 2022. The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are actually taken from your paycheck. This strategy can be implemented by PayPal employees to make up for low or missing quarterly estimated tax payments.

5. Save more for retirement
Deductible contributions to a traditional IRA and pre-tax contributions to a PayPal-sponsored retirement plan such as a 401(k) can reduce your 2022 taxable income. As a fortune 500 employee, if you haven't already contributed up to the maximum amount allowed, consider doing so. For 2022, PayPal employees can contribute up to $20,500 to a 401(k) plan ($27,000 if you're age 50 or older) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if you're age 50 or older).* The window to make 2022 contributions to a PayPal-sponsored plan generally closes at the end of the year, while you have until April 18, 2023, to make 2022 IRA contributions.

*Roth contributions are not deductible, but Roth-qualified distributions are not taxable.

6. Take the required minimum distributions
If you are a PayPal employee age 72 or older, you generally must take required minimum distributions (RMDs) from traditional IRAs and PayPal-sponsored retirement plans (special rules apply if you're still working and participating in PayPal's retirement plan). You have to make the withdrawals by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of the amount that wasn't distributed on time. As a fortune 500 employee, making these distributions in a timely manner is essential as to avoid the late penalty.

7. Weigh year-end investment moves
PayPal employees and retirees shouldn't let tax considerations drive investment decisions. However, it's worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. As a PayPal employee, any losses over and above the number of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.

Tags: Financial Planning , Tax , Retirement , 2022

What is the 401(k) plan offered by PayPal?

PayPal offers a 401(k) plan that allows employees to save for retirement through pre-tax contributions, which can grow tax-deferred until withdrawal.

How does PayPal match employee contributions to the 401(k) plan?

PayPal provides a matching contribution to employees' 401(k) plans, typically matching a percentage of the employee's contributions up to a certain limit.

Can employees at PayPal choose how to invest their 401(k) contributions?

Yes, PayPal allows employees to choose from a variety of investment options for their 401(k) contributions, including mutual funds and target-date funds.

What is the eligibility requirement for PayPal’s 401(k) plan?

Employees at PayPal are generally eligible to participate in the 401(k) plan after completing a specified period of service, often within the first year of employment.

How can PayPal employees enroll in the 401(k) plan?

PayPal employees can enroll in the 401(k) plan through the company's benefits portal, where they can select their contribution amount and investment options.

What is the maximum contribution limit for PayPal employees under the 401(k) plan?

The maximum contribution limit for PayPal employees under the 401(k) plan is subject to IRS guidelines, which can change annually.

Does PayPal offer a Roth 401(k) option?

Yes, PayPal provides a Roth 401(k) option, allowing employees to make after-tax contributions that can grow tax-free.

What happens to my PayPal 401(k) if I leave the company?

If you leave PayPal, you can choose to roll over your 401(k) balance to another retirement account, cash out, or leave it in the PayPal plan if eligible.

Can PayPal employees take loans against their 401(k) savings?

Yes, PayPal allows employees to take loans against their 401(k) savings, subject to specific terms and conditions set by the plan.

Are there any fees associated with managing the PayPal 401(k) plan?

Yes, there may be administrative fees and investment-related fees associated with the PayPal 401(k) plan, which are disclosed in the plan documents.