Newspaper article THE JOURNAL RECORD

'Tis the Season to Celebrate Your Good Employees

Newspaper article THE JOURNAL RECORD

'Tis the Season to Celebrate Your Good Employees

Article excerpt

Although the retail rush to put Christmas items on sale even before Halloween has passed raises a few eyebrows, business owners have at least one legitimate reason to jump ahead to holiday gift- giving, accountants and tax experts said.

Now's definitely the time for employers to look at the bottom lines of their businesses to see if they have profits and how they can spend it so they don't have to pay taxes on it, said Lynda McColl, a certified public accountant, retirement financial advisor and owner of McColl & Associates in Mustang. And at the same time they're looking at what they can do to retain some of those outstanding people who work for them.

And the biggest problem managers fail to recognize about bonuses and gifts?

That almost all of them are taxable, said Steve Sahlein with the American Institute of Professional Bookkeepers.

It's a rare event when a Christmas bonus isn't taxable, Sahlein and other experts said. Consider for example the difference between the bonus of a frozen turkey for Christmas dinner and a gift certificate to purchase the same turkey at the grocery store: The turkey is tax-free, but the IRS considers the gift certificate to have potential monetary value, they said.

The turkey itself - much like the cliche employment anniversary pen set - is a de minimus fringe benefit, so small as to be negligible, said Jon Forman, a law professor at the University of Oklahoma.

And true gifts from employers aren't given often because the federal tax code allows a maximum value of $25 per year before deductions have to be made. The vast majority of transactions from employer to employee are considered some form of compensation for services, Forman said.

Terminology and frame of reference are important, too. If a business's finances were particular good because employees put in extra work and the boss gives them a little extra money for it, that could likely be considered a production bonus, which means overtime wages and more tax withholdings. …

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