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#824515 - 09/27/07 02:52 PM Cash incentives to employees - Taxable?
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Just double checking - are cash incentives taxable to the employee?

Has anyone found a way to structure them to 'avoid' tax or have the tax paid by the institution in some way?

Thanks.

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#824624 - 09/27/07 03:57 PM Re: Cash incentives to employees - Taxable? °X°
John Burnett Offline
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They are taxable, subject to income and FICA taxes.

I recall a few times when some of the larger incentives my former bank paid were "grossed up" to net a nice round number for the employee. The payroll department plugged the net amount into a spreadsheet and calculated a gross amount that would yield that net. That effectively put the cost of the taxes withheld on the bank.
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#825141 - 09/27/07 09:13 PM Re: Cash incentives to employees - Taxable? John Burnett
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Thanks, John. Since each employee ends up paying a different percentage of tax, depending on their tax bracket, your former bank must have estimated the gross number based on a standard percentage.

Do you recall if the payment (gross) was paid through payroll, so that tax was deducted at the time of the payment?

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#825150 - 09/27/07 09:31 PM Re: Cash incentives to employees - Taxable? °X°
Milby Offline
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I seem to remember that incentives/bonuses are taxed at a standard amount (I want to say is was something like 32%, but I could be wrong...it has been 9 months since bonus time and I can't remember that far back!). Therefore the calculation would be the same for everyone. Of course, I'm in Texas with no state income tax, so I don't know how the state income tax would be calculated.

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#825166 - 09/27/07 09:42 PM Re: Cash incentives to employees - Taxable? Milby
John Burnett Offline
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Yes. I think the IRS allows a standard percentage to be applied when a bonus is paid separately from regular payroll. And the payroll system (we used ADP at the time) was used both because it was all set up for direct deposit, and because the withheld amounts rolled nicely into year-end totals already established on the system.

We also happen to have a flat rate state income tax here in Massachusetts, so 5% was withheld there.
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#825173 - 09/27/07 09:48 PM Re: Cash incentives to employees - Taxable? Milby
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Thanks Milby and John.

Hmmmm.....looks like grossing up the incentive payment is the route to go, running that amount through payroll.

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#828678 - 10/04/07 02:05 PM Re: Cash incentives to employees - Taxable? °X°
Nanwa Offline
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Originally Posted By: _X_

Has anyone found a way to structure them to 'avoid' tax or have the tax paid by the institution in some way?



Structure? Avoid tax? X, I may have to file a SAR on you!
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