Are Christmas Bonuses Taxable?

Question

I have a small company, and this year i would like to give deserving employees a Christmas bonus. However in Quickbooks, I am not sure if this is a taxable bonus or not. Can any one help me?

Answer 1

Bonuses are fully taxable. You must withhold SS and Med at the usual rates. Fed income tax must be withheld at the statutory rate of 25% though you may withhold at a higher rate if the employee requests.

Answer 2

Of course they are! Why would they not be? Employers can not give non-taxable gifts to employees, other than very nominal gifts. Generally it must be worth less than $25 and cannot be in cash or a cash equivalent. If he gives you a Christmas turkey or ham, literally, or a gift certificate that is exchangeable for one (but NOT for cash!) then that can be treated as a non-taxable gift. Anything of greater value or cash in any amount is fully taxable as ordinary income and is subject to income and FICA taxes. The guy in the next cubicle won a high-dollar big-screen TV at the company Christmas party. He was rubbing it in everyone's face until he saw his next pay stub where the tax on it nearly wiped out his entire paycheck. I don't know which was worse -- his bragging about the win or his tears over the tax. The gal on the other side is now the proud owner of a stunning Sony Bravia 55" 240Hz TV set ($5,500+ at most discounters) for $1,000. She made it back from the bank about 30 seconds ahead of me. :((

Answer 3

Bonuses are taxable...if you use a payroll company they can add it in as a seperate line item to show employees that the extra funds were a bonus. If you use QB solely, you can still break it out as a seperate line item. Bonuses are still considered wages so there won't be anything special to add to W2's either.

Answer 4

all bonuses are taxable...

if you are creative enough, (speak to an accountant or CPA) , but two years in a row the company i used to work for gave us bonuses... but the way they were put through the payroll system was taxed at the payroll rate and not the bonus rate. so the gross bonus was like 285 something, and after taxes the check was like an even 250. That was sweet.

Answer 5

Christmas Bonus Tax

Answer 6

All cash bonuses are taxable income. If they're not large bonuses (a hundred bucks or so), simply withhold FICA and let it go at that. If you're handing out substantial bonuses, then you need to also withhold federal income taxes.

Answer 7

Yes; and bonuses usually have the highest tax bracket % withheld since they are not normal income. For example, it is possible that an employee's total pay might end up primarily bonuses! In which case, if their withholdings are based only on their normal salary/hourly pay, then their tax bill would be awful and they would likely get some nasty penalties for not having had enough withheld.

Answer 8

Bonuses are considered taxable income.

Answer 9

all bonuses are taxable. You should deduct taxes, also, and this should be included on their W-2 form.

some companies give out food, etc and do not put this on w-2's, as it is a small amount.

Answer 10

From your business standpoint it is treated as an expense allowance. See how the amounts of bonuses compare with your allowable expenses.

Taxable to employees in a static sense but they may be able to shelter some or all of the bonus depending on their individual tax situation.