Year-End Bonus

[BOB W]

I am not disputing the ability of a shareholder/owner to make a personal gift to an employee. The problem arises when the the payment (i.e, check) is made payable to the employee directly FROM the business. It will be then treated as wages. If the check is made payable to the shareholder/owner, he can do whatever he wishes with it. In the case we are discussing, it was classified as a bonus, and paid directly to the employee.

I ( maybe we) don't say you are wrong..........because you are right, completely. But sometime we do what we must do to move on with our work load.

[AJsTax]

I agree that

I am not disputing the ability of a shareholder/owner to make a personal gift to an employee. The problem arises when the the payment (i.e, check) is made payable to the employee directly FROM the business. It will be then treated as wages. If the check is made payable to the shareholder/owner, he can do whatever he wishes with it. In the case we are discussing, it was classified as a bonus, and paid directly to the employee.

what you say is the absolute correct way, and I mentioned that in my op. But in the real world the employer often refuses to allow the gifts to be wages, so we must reclassify as distributions or draw. Even if that means changing the checks to avoid future problems, the intent was to make the employees a christmas gift and is then in the books that way. That is what happens the real world as you already know. If he gets audited (very little chance of that) he might get caught, but the owner is warned of that and really doesnt care at the time.