Determine the amount, if any, that is includible in the gross income of the emplyee: An employee arranges to have his annual bonus, $1,000, paid directly to his son. His objective is to make a wedding gift to the son.
2007-11-04 05:20:58 · 5 answers · asked by nceirishka 1 in Business & Finance ➔ Taxes ➔ United States
what you are attempting to do is "gift" a sum of money to a relative which in turn you would still have to report it as income on your tax return which you may,,, i repeat may be able to deduct a portion of. but your son will then be requiered to report the 1000.00 as income on his return and that makes it taxable...he would have to pay.
You both wind up paying the government taxes.
you would be better off just giving him cash since it such a small amount.
2007-11-04 05:33:05 · answer #1 · answered by gdriver001 2 · 0⤊ 4⤋
The entire amount of the bonus is includable in the employee's gross wages and income for the year.
Setting aside the fact that most employers would not do this, only the net amount of the bonus would be paid to the son. There is a statutory withholding rate of 25% on all bonuses and other irregular payments to employees, plus Social Security and state tax withholdings. Depending upon the state's laws on bonuses and irregular payments it's possible that more than 40% of the gross bonus would be withheld for taxes.
Contrary to what "gdriver001" has posted, you can not deduct the value of a gift. Nor does the recipient ever include it in income. While the amount invoved is less than the Gift Tax exclusion amount, if the taxpayer made other gifts to the son during the tax year that totalled $12,000 or more the taxpayer would have to file a Gift Tax return and might have to pay Gift Taxes, depending upon his lifetime gifting history.
2007-11-04 05:48:03 · answer #2 · answered by Bostonian In MO 7 · 2⤊ 1⤋
Doing things that way would be highly irregular, but the whole bonus amount would still be included in his gross income.
2007-11-04 05:29:54 · answer #3 · answered by Judy 7 · 1⤊ 0⤋
It is taxable as income and will show up on your W2 as taxable income. You will pay the taxes on it, and you "give" it to your sun under the $15K per year tax loophole for gifts to immediate family members.
2015-02-13 07:28:34 · answer #4 · answered by Jon 2 · 0⤊ 0⤋
In addition, keep in mind that the son could have to declare that amount as gift income and get taxed on it again...
2007-11-04 06:40:15 · answer #5 · answered by Other Guy 3 · 0⤊ 3⤋