One check is a regular pay roll check with a low hourly rate and taxes are taken out.The other check his boss says is a "bonus" but it is really the balance of his weekly pay. He does not take out any taxes from these "bonus" checks so now my friend ended up owing a lot of money on his taxes. Why would his boss do it this way? It all seems a little tricky to me but I don't understand. Please help explain what is going on? Thanks.
2007-03-16 03:02:49 · 9 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
Your friends boss is a cheat!! Your friend should report this practice to the state labor board. You friend is or will miss out on a number of benefits because of this practice. As for your friends tax return he must file as the wages and bonus earnings were reported to the IRS but can file an amendment if the problem is corrected because of labor board action.
2007-03-16 03:12:04 · answer #1 · answered by ? 6 · 3⤊ 0⤋
It sounds like your friends boss is paying a portion of his pay under the table, possibly to avoid benefits and unemployment insurance. My guess is that the "bonuses" did not show up on his W-2 form either. Other wise the taxes would already have been withheld. I does sound a bit shady.
My suggestion is that ,as honest taxpayers, if you know that you will have to pay taxes on the extra income anyways just take that amount out of your paycheck your self and sock it away in a high yield CD or some other safe investment for the year. At least you can make some money off of it before having to pay it back next April.
2007-03-16 10:13:26 · answer #2 · answered by Nephroid 3 · 1⤊ 0⤋
What your friend's boss is doing is clearly illegal. Even if these really were bonuses, they must be treated just like wages as far as taxes are concerned, with taxes withheld and the employer paying his half of social security and medicare taxes, and paying any other employment taxes due like unemployment comp. His boss is doing this to save money by not paying taxes he is legally required to pay.
2007-03-16 18:27:42 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
The employer saves himself some money in taxes and insurance by lowering the hourly rate and the employee pays more taxes due to the 'bonus'.
2007-03-16 10:20:18 · answer #4 · answered by Amy V 4 · 1⤊ 1⤋
Hmm....never heard of that. But your friend should probably put some of that Bonus money away in a savings account for tax time.
2007-03-16 10:09:58 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Easy. Employers pay into Pension Plans and Workers Comp based on Salary. Employers also pay Disability premiums based on Salary.
Not on bonuses!
Your friend's boss is CHEATING the system.
2007-03-16 10:07:14 · answer #6 · answered by kja63 7 · 2⤊ 1⤋
For the shake of paying Employees due like ESI & PF etc.. ESI & PF based on salary. They may do like this. But not more use ful for long run businesses.
2007-03-16 10:16:32 · answer #7 · answered by samsung 4 · 0⤊ 1⤋
you can legally AVOID taxes, but what he is doing is EVADING taxes. all payments to employees must have all the appropriate taxes withheld.
2007-03-16 14:18:16 · answer #8 · answered by RichManPoorMan 2 · 1⤊ 0⤋
Your friend's boss is on the fiddle.
2007-03-16 10:10:21 · answer #9 · answered by ChocLover 7 · 1⤊ 0⤋