The Peck Group, LC
  • Comprehensive Tax Law Representation Since 1995

    We handle every aspect of tax law: preparing tax returns, representing clients during audits, resolving IRS and state tax controversies, and creating tax planning strategies for the future.

  • Problems With The IRS Or State Tax

    Our attorneys are committed to providing efficient and effective tax solutions for individuals and businesses in Georgia and nationwide.

  • Planning For The Future

    Our lawyers help individuals and businesses with all aspects of estate and tax planning. We help our clients use proactive strategies to minimize tax implications in the future

  • Changing The Balance Of Power

    Does it feel like the government has all the power? Taxpayers have rights, too. We use our knowledge of tax law to shift the balance of power and ensure that your rights are protected.

  • Tax Solutions … And Peace Of Mind

Annual bonuses and gifts are taxable in the year you receive them

Are you expecting a holiday gift or bonus? If so, terrific. You should be aware, however, that gifts and bonuses are taxable as income. Even if your employer specifically states that you're receiving a gift, the IRS won't treat that present as an actual gift but rather as additional wages you have received.

You will need to report the bonus or gift as income in the year it is received. This is true no matter the form of payout -- a check, cash, physical gift or cryptocurrency. The rules can be slightly different for stock options that are specifically excluded from that year's income. If you receive stock options, you should contact a tax attorney about how to report the income.

So, if your boss hands you a check at the annual holiday party, you will need to claim it as income on your 2019 taxes. If your boss announces the bonus at the party but doesn't actually pay it until January, you will need to remember to account for it in your 2020 taxes.

If you do your taxes off a Form W-2, you shouldn't need a reminder. That's because your gift or bonus should be included in your income on that form.

Despite what you may have heard, there is no surtax on bonuses for the average taxpayer. There is a chance the bonus could push you into a higher tax bracket, but that doesn't mean you will be paying extra tax. You may be able to drop back to your original tax bracket using deductions, or you may pay a small amount of taxes in the higher tax bracket. Be aware that the higher tax rate would only apply to the amount that actually comes in over the bracket threshold.

Will my employer withhold with the gift or bonus in mind?

Generally, yes. Your employer is expected to account for the bonus or gift as if it were regular income, including withholding taxes for it.

There is a chance your gift or bonus withholding will be at a higher rate than the rest of your income. In some situations, the IRS considers this income to be supplemental wages for withholding purposes. If that happens, your employer will withhold slightly more than is actually necessary to cover your taxes.

However, again, gifts and bonuses are taxed at the same rate as your regular income, so this extra withholding will probably result in a tax refund. If, for some reason, your employer didn't withhold enough, you would then need to make an estimated tax payment.

If you have questions about how to account for a bonus, gift, or any additional income, contact your tax lawyer for assistance.

No Comments

Leave a comment
Comment Information
Email us for a Response

Talk to an Attorney

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

The Peck Group, LC
5855 Sandy Springs Circle N.E., Suite 190
Atlanta, GA 30328

Phone: 770-884-6914
Fax: 770-933-2369
Atlanta Law Office Map

Payment Cards