How can I pay my employees a cash Christmas bonus without them having payroll taxes taken out?

Cash bonus for Christmas without taxes for them?

How can I pay my employees a cash Christmas bonus without them having payroll taxes taken out?
There is no legal way to do that. You could pay after tax cash out of your pocket and that wouldn't get caught or you can add enough to bonus to cover the tax, but there is no way to do it the way you want.
Reply:No.





Any cash, or items similar to cash (ie. gift cards) are subject to income tax as well social security and medicare.
Reply:According to my accountant sister, yes, if you increase the bonus and pay the tax yourself.





We're in California, where we have State Income Tax, as well as Federal; if you're in the same situation, you need to do both.





But you figure out what you want to give them, then make the official bonus enough to cover the taxes, and pay the taxes directly.
Reply:Give them cash but you may need to pay taxes on it unless you do it personally (you have already paid payroll taxes on them for yourself, part of your pay or savings).
Reply:pay them out of your pocket with cash.
Reply:In order to do it legally, I think you have to be taxed on it...what you can do is increase the bonus enough to cover the additional tax.





Hope this helps!
Reply:You can't. And do PLEASE ignore the idiot who says to pay in cash and fill out fake W-9s. That is tax fraud, pure and simple.





Legally you must withhold taxes on bonuses. You do NOT get a choice on this. Additionally, you must withhold income tax at the statutory rate of 25%, NOT the employee's regular withholding rate. You are subject to your usual payroll taxes on these as well.
Reply:You can't legally do that. If you want them to net a certain amount then you have the option of paying the taxes on their behalf and that is called a gross-up. Your payroll department will know how to do this. At least I would hope so because it is pretty common in payroll.

permanent teeth eruption