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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I have 2 full time employees. Can I give them a year end bonus

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I have 2 full time employees. Can I give them a year end bonus somehow (to reduce my business income) without withholding payroll tax? If so, would the bonus be self-employment income to them?

Hello Dirtfarmer,


You cannot give bonuses to your employees which are not subject to tax. Any bonus that you give to them must be included in their taxable income for the year.


If you pay these people throughout the year as regular employees, you cannot simply classify the bonus as self employment income. They are either classified as employees or as independent contractors, and the manner in which you pay them must be consistent throughout the year, including any bonuses you may choose to pay them.


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Thank you Dirtfarmer



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