The holiday season is almost here.  If you own a business, chances are there are employees that you want to reward for their chard work.  Holiday bonuses are one way that you, as a business owner, can reward such employees at the end of the year.   If employee bonuses are something you are considering, it is important to understand how they should be calculated and how they will affect your payroll accounting.  Failing to understand these issues, as well as various tax-reporting requirements, can result in costly accounting errors and tax penalties for you and your employees.   One of the best ways to avoid the hassles that can be associated with bonuses is to utilize a professional payroll service, such as SourceOne Payroll.  Their professionals know exactly how to administer end of the year bonuses and how to make sure that your business meets the various legal and accounting needs associated with them.   

End of year bonuses can be structured in many ways that are often dependent on the type of employment arrangement you have with your employees.  Some bonuses are discretionary in nature.  This means that the employer can use his or her discretion as to whether or not the bonus is issued, and for how much it will be.  Often, these bonuses are calculated based on the employee’s hourly or annual wages.  Other types of bonuses are part of an employment contract, and are calculated based on a formula that is part of the employment agreement between the employer and the employee.  Thus, different structures for bonuses require different accounting methods to determine not only the right amount to give, but also what tax liabilities are incurred by that gift.  This can be complicated and require a detailed knowledge of both tax law and proper accounting methods.   As a business owner, you must know what state and federal laws apply to the type of bonus you are administering in order to avoid costly accounting errors and tax penalties that can be associated with them.

While you can certainly research all the various methods and tax consequences associated with different types of end of year bonus compensation, you will likely save money, time and hassle by having a professional assist you with this process.  Leave more time to develop your business and revenue base, and let the professionals at SourceOne Payroll help you manage your payroll needs.   Their expert staff has the knowledge and tools that are necessary to make this end of the year process run smoothly and accurately.