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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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Hi. My company normally pays out bonuses in the year earned

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Hi. My company normally pays out bonuses in the year earned (2013 bonus payments will be made in 2013). Can I request that the company pay my bonus just after year end (like Jan 2nd?) without incurring any penalty to myself or the company and therefore incur my payroll tax expenses in 2014?

Lev :

Hi and welcome to our site!
A taxpayer “constructively receives” income when a payer makes it available so that the taxpayer can draw upon it at any time, or so that the taxpayer could have drawn upon it during the taxable year if he or she had given notice of intention to withdraw. [Section 1.451-2(a) of the Regulations].
So - when the bonus is paid in 2013 - it is reported as your taxable income for 2013 - and your employer deducts your bonus in 2013.
When the bonus is paid on Jan 2, 2014 - it will be reported as 2014 income and will be deducted for your employer on 2014 as well.
You definitely may request your employer to pay the bonus in 2014, but your employer has to agree with that because their deduction will be delayed as well.


Sounds straightforward. My employer is on the accrual basis so they would possible still recognize the deduction (for books at least) in 2013. I wasn't sure if this would fall under some "deferred compensation" rule since I could be the exception if I'm granted a request to defer payment to 2014 where the other employees would be paid in 2013. Thanks for the help.

Lev :

As long as the bonus is announced and it may be treated as "deferred compensation" - so there is no issues for your employer to recognize the expense as long as they are on the accrual basis.
Still you need your employer o agree with you request.

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