Employee Bonus Payout?

Question

My Employer is paying out "gross" amount bonuses to all employees and is telling us we are responsible to pay taxes on them for 2007 - They are issuing 1099-Misc for these bonuses and not reporting them on our W-2 - can They do this and should I pay estimated tax payments now to avoid penalties

Answer 1

NO, absolutely NOT. The employer MUST tax all wages, and bonuses are wages. See here: http://www.irs.gov/publications/p15/ar02.html#d0e1560 for the taxing of bonuses (supplemental wages)

Answer 2

If your income from that employer if normally reported on a 1009, then they can. But if you're an employee who gets a W-2, as it sounds like you are from your question, then no, it's not legal.

If you work for a small company, the employer might not realize this although they should.

If you get the money that way, it's probably a good idea to make an estimated payment anyway, since if they do send out 1099's, it could take awhile to get it sorted out.

Answer 3

No, they CANNOT do that! They must withhold taxes from the payments. Irregular payments such as bonuses are withheld at a flat 25% unless you designate a higher amount to be withheld. They must be included on your Form W-2.

Answer 4

if you are a W-2 employee, they should not be 1099ing you.
depending on the amount and what your state is...I would prolly hold back 35 percent just in case. see your tax preparer.

Answer 5

Yes, they can do this. The easiest way to cover the taxes is to increase your regular withholding by just a bit for the remainder of the year. You could also make an estimated payment in the quarter you receive the payment. Either way, make sure you CYA!! ;-)

Answer 6

Depends on how much the bonus is. If its a substantial amount possibly. Check with your tax preparer or call the IRS toll free number