End of the Year Bonuses

It’s that time of the year when company bosses start discussing End of the Year or Holiday bonuses. The IRS is very black-and-white about these types of bonuses. In this article, I’m going to break it down between employees and contractors.

Employee Bonuses

Gifts – The IRS has ruled that occasional gifts to employees under $100, de minimis, are acceptable. These gifts can include occasional donuts, coffees, tickets to entertainment events, holiday gifts, flowers, fruits, baskets, etc. One of the biggest items is that these items have to be occasional. If these items become habits or happen on a normal routine, they are no longer considered bonuses.

Cash & Gift Cards – Generally speaking, any gift of cash or gift cards are considered part of an employee’s wages and should be reported on a W-2.

Contractor Bonuses

Gifts – Occasional gifts (birthdays, holidays, end of the year) to contractors under $25 and considered normal business practices.

Cash & Gift Cards – Just like with employees, any gift of cash or gift cards are generally considered part of the compensation to a contractor and should be reported as income on their 1099.

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Angelica Johnson

Professional Bookkeeper at Open Roads Bookkeeping

Angelica Johnson is a professional bookkeeper and owner of Open Roads Bookkeeping. She greatly enjoys helping businesses meet their full potential. Angelica has always loved numbers and spent several years as a middle and high school math teacher. She can use her love of numbers and accounting to clean and organize your books removing the stress from finances and taxes, so you can have more family time.

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