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

Healthcare Provider Update: Healthcare Provider for Sonic Automotive Sonic Automotive primarily offers its employees health insurance through a plan established with Aetna, which provides comprehensive healthcare coverage and plans tailored for the company's workforce needs. Potential Healthcare Cost Increases in 2026 In 2026, Sonic Automotive and its employees are likely to face significant healthcare cost increases, driven predominantly by a convergence of factors. A projected rise of 8.5% in employer-sponsored insurance costs reflects ongoing inflation in medical expenses and the staggering demands placed on health providers. Additionally, the potential expiration of enhanced ACA premium subsidies may force many employees to bear higher out-of-pocket costs. As these shifts unfold, it may become critical for Sonic Automotive to evaluate its healthcare strategies and potentially adjust its offerings to mitigate the financial impact on its workforce. Click here to learn more

Here are some things for Sonic Automotive 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
Sonic Automotive 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 Sonic Automotive employee, doing so may enable you to postpone payment of tax on the income until next year.

2. Accelerate deductions
Sonic Automotive 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 Sonic Automotive 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 Sonic Automotive 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 Sonic Automotive employees to request a Form W-4 change and for their employers from Sonic Automotive 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 Sonic Automotive 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 Sonic Automotive-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, Sonic Automotive 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 Sonic Automotive-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 Sonic Automotive employee age 72 or older, you generally must take required minimum distributions (RMDs) from traditional IRAs and Sonic Automotive-sponsored retirement plans (special rules apply if you're still working and participating in Sonic Automotive'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
Sonic Automotive 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 Sonic Automotive 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 Sonic Automotive?

The 401(k) plan at Sonic Automotive is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.

Does Sonic Automotive match contributions to the 401(k) plan?

Yes, Sonic Automotive offers a company match for employee contributions to the 401(k) plan, helping to boost your retirement savings.

When can employees at Sonic Automotive enroll in the 401(k) plan?

Employees at Sonic Automotive can enroll in the 401(k) plan during their initial onboarding or during the annual open enrollment period.

How much can employees contribute to the Sonic Automotive 401(k) plan?

Employees can contribute up to the IRS limit set for the year, which can vary annually. Sonic Automotive encourages employees to check the current limits.

What types of investments are available in the Sonic Automotive 401(k) plan?

The Sonic Automotive 401(k) plan offers a variety of investment options, including mutual funds, stocks, and bonds, allowing employees to diversify their portfolios.

Is there a vesting schedule for the company match in Sonic Automotive's 401(k) plan?

Yes, Sonic Automotive has a vesting schedule for the company match, which means that employees must work for a certain period before they fully own the matched contributions.

Can employees at Sonic Automotive take loans against their 401(k) savings?

Yes, Sonic Automotive allows employees to take loans against their 401(k) savings, subject to specific terms and conditions outlined in the plan.

What happens to my 401(k) savings if I leave Sonic Automotive?

If you leave Sonic Automotive, you can roll over your 401(k) savings into another qualified retirement plan, withdraw the funds, or leave them in the Sonic Automotive plan, depending on the balance.

How can employees at Sonic Automotive access their 401(k) account information?

Employees can access their 401(k) account information through the online portal provided by Sonic Automotive’s plan administrator.

Does Sonic Automotive offer financial planning resources for employees regarding their 401(k)?

Yes, Sonic Automotive provides access to financial planning resources and tools to help employees make informed decisions about their 401(k) savings.