Give yourself a bonus on the table, then use that to cash out to employees. You eat the taxes, but that just adds to the bonus allure. :)

So long as you don't give them more than a $14,000 bonus, this would work. Keep in mind your employees probably sit in a lower tax bracket so it would likely be cheaper to just give them enough to cover the taxes.

Talk to your accountant. Don't mess with the IRS.

A successful one whose company does extremely large projects.

Only way to do it is under the table.. Take cash payment from a client or 2 and then distribute to employees.. Do not take this as any form of legal advice. Everything gets taxed, period. I personally have no desire to spend time in Club FED.

Guess what, you may be incredibly wrong on this one. It would be much like paying a regular employee as a subcontractor. The IRS frowns upon that, as we all know. When the audit comes it is the employer that get socked. You get caught up with back taxes, then pay some eye popping penalties.

The employer would also be on the hook for the employer responsible taxes including any penalties.

But how is the employee any different than someone who reports tips??? If they don't claim the cash as income, they will have to pay if they ever get audited.

How many people are getting audited and having to pay for "Use" tax from all of their online non-taxed purchases they've made over the year? Probably not many...but if the red flag is raised, the employee's are paying as well.

I'll do just that.
Bonus is a surprise and I don't need to nor do I want to bother employees with how much taxes they need to withhold or if the bonus will put them in next tax bracket.
If I take the distribution against myself, then I'm responsible for the taxes.
Not that I could or would, but if I had a million dollars and wanted to give it to any one employee, as long as it wasn't a paycheck or other forms of payment then no matter what audits IRS wanted to do, since distribution was ran thru the books, no one would be on the hook for any income or penalties.

If you give the money to your employees, they must claim it, unless the taxes are paid in their name.

Your belief of the IRS tax code is just incorrect.

I think that payments of less than $600 are still exempt from needing a 1099 or, as I posted, a separate W-4 can be filled out, to prevent taxes from being withheld (FICA still comes off).

How about paying them for expenses for a period that equals the bonus amount the employee will receive? No tax, it's legal (it's a business expense) and if they're required to drive to a specific business-related location, it would be hard to deny its validity.

Another good idea i to start a profit-sharing plan. Everyone benefits.

The other argument is what happens if you get bigger? Start out with cash now and then what do you do when have 5 employees? 10 employees? At some point, you'll end up putting it on their check and then they will get pissed about now having to pay taxes....damned if you do, damned if you don't.

The real crappy thing about putting it on the check is that you have to also pay your employer responsible taxes as well. So giving 10k to all of your employees will result in them only getting 8k and you end up paying 11k. Neat.

If he goes ahead with his plan, it could be a gift tax situation. There is $14k exclusion per donee.

[Link: irs.gov]
[Link: irs.gov]

That is unless the IRS decides to reclassify the gift as wages. Talk to your accountant.

Pay them in Best Buy gift cards (lol)....they only pay sales tax..

If they drive their own cars / trucks get a company gas card, let them fill up once a week on your dime.
I'm sure there are ways to do this - Tons of gift cards for dining / movies even resorts out there.
Heck you can buy a bunch of Visa gift cards at $100 each and hand them out like candy.
Got to be ways to put these things on the books and keep everyone happy.

Damn it! my accountant is out of town.

So from reading this, it's apparent that any money that's sitting in my personal bank account, that I have already paid taxes on, could be taxed again if I chose to give it someone!
That's just fu#ked up!
If I decided that my buddy Tom is down on his luck and wanted to help him out by simply giving him money so he can pay for his rent and feed the kids, IRS is stating that I need to pay taxes on that?!?

That's it! I'm moving to Canada :-)

Anyone who complains when they get a bonus is an A-hole unless the business scales it back after stating the amount in advance.

The first store I worked for was a mom and pop operation and three of us started working there when it was very small and not doing well. Rather than take us out for the annual Christmas party, they had it at their house and handed out our bonus and pay checks at that time. We were paid separately for hourly and commission and when one of the guys got his check, thinking it was his bonus check, he stood up, walked over to the VP/secretary (AKA, the co-owner/wife) and said, "I'm sorry, Mary, I can't accept this".

It wasn't his bonus check. Awkward? A little bit.