It is that time of year when most businesses give bonuses to their employees.  So how do you account for them?

Bonuses that are given in the form of money are taxable; you must treat it as any other payroll, including deducting all payroll taxes. You do not need to take other deductions that are taken from their normal check such as health insurance.  Remember that it does not matter if the bonus is $20.00 or $2,000.00, it’s still taxable. By the way, the use of gift certificates does not change the taxability of it you still have to withhold payroll tax.

Actual gifts on the other hand, are generally not taxable as long as they are not excessive and are not in the form of cash or cash equivalents.  That means that the traditional Christmas turkey or ham is perfectly acceptable. As a general rule the gift should be valued under $100 to be considered reasonable. Which means cars, TV’s, and laptop computers are considered taxable gifts.