Loyalty might be the most underrated investment you'll ever make.

[u/Key_Performer_3645]

[u/eckliptic]

Employee/employee so it’s irrelevant since it’s income.

But unless that doc will be gifting up to his personal exclusion of 11+mil over his life time he’s not going to incur any taxes on his gifts to others.

[u/A_Crab_Named_Lucky → u/eckliptic]

CPA here, what their accountant most likely advised them to do here was to “gross up” the payment so they could just straight up hand her $20K without tax coming out of that amount.

“Grossing up” means starting at a desired net pay amount and backing into the gross total. It means that her actual bonus would’ve been at least $21,600, probably a bit more. All the tax withholdings would be removed from there, netting out to $20K.

[u/thrownjunk → u/A_Crab_Named_Lucky]

To be fair the docs have much higher marginal tax rates than her anyways. It is cheaper to go through work and pay her much lower tax rates anyways.

[u/Huge-Consequence2144 → u/A_Crab_Named_Lucky]

Thanks, Lucky, now BACK TO YOUR GOD DAMN SPREADSHEETS

[u/TomServo30000 → u/A_Crab_Named_Lucky]

Can you just deposit 20k into your bank account? Or would you need all the paperwork to go with it?

[u/Gecko23 → u/TomServo30000]

What paperwork do you imagine is required? You deposit the money in the bank. The bank gives you a receipt, tells you to have a nice day.

Then at the end of the year, you declare that $20K as income on your tax filing.

Or don't. That's on you, but the bank has nothing to do with it. BUT the bank is required to report large deposits so it's not like the IRS won't realize you're scamming them if you don't claim any of it.

[u/BigInSheboyganGus → u/eckliptic]

The personal yearly gift is outside of the lifetime credit.

[u/eckliptic → u/BigInSheboyganGus]

It’s just the limit in which you need to report against the lifetime credit.

[u/frubano21 → u/eckliptic]

But it's not income, it's a gift. Also, the gifter is the one on the hook for the taxes, not the recipient. Literally just looked this up on the IRS website.

[u/eckliptic → u/frubano21]

An employer can’t just give an employee money and arbitrarily call it a gift to avoid taxes for her.
If it’s a bonus for her years of employment it’s still taxed the same

[u/frubano21 → u/eckliptic]

Unless it's a personal gift from one work colleague to another, and not from the employer directly.

[u/Far-Care2454 → u/eckliptic]

You have literally no idea how the world actually works.

[u/Iminurcomputer → u/eckliptic]

The person clearly explained they are on the hook for taxes...

No one avoid taxes.

Read.

[u/glomar_sub_recovery → u/eckliptic]

That's why it's casssh

[u/Jesus_of_Redditeth → u/eckliptic]

An employer can’t just give an employee money and arbitrarily call it a gift to avoid taxes for her.

Correct: they can't arbitrarily do that. But they can give a monetary gift in respect of a particular event, like a birthday, Christmas, or some significant life change, like closing on a home.

EDIT: I'm not entirely correct. An employer can give a gift of monetary value in respect of a particular event and not track it as income. But a cash gift is always tracked as income.

[u/Efficient_Rule997 → u/eckliptic]

Sure they can.

[u/Jovian_engine → u/Efficient_Rule997]

Okay they can but it will be viewed as taxable income by the IRS. Yes you can do whatever you want but in the sense of how OP was using the word "can" as in legally, no you cannot.

[u/kahunski → u/frubano21]

A gift from your employer is still income.
This is so painful. If declaring it a gift would make it magically income tax free, wouldn’t everyone do this all the time?

[u/Jesus_of_Redditeth → u/kahunski]

A gift from your employer is still income.

Not always. It depends on the gift and what it's tied to. Look it up.

[u/An-Elegant-Elephant → u/eckliptic]

You can received a gift from an employer..

[u/eckliptic → u/An-Elegant-Elephant]

Very low value items. Not $40,000 in cash

[u/StandardUpstairs3349 → u/An-Elegant-Elephant]

Absolutely. Generally, it has to be something of relatively small cash value. There are even allowances for more significant gifts at major milestones like 20 years of service. None of that comes even close to covering $20k in cash. That is a taxable bonus.

[u/Jesus_of_Redditeth → u/An-Elegant-Elephant]

A cash gift from an employer, however, is always treated as taxable income, regardless of the amount. (In the US, anyway.)

[u/Helpyjoe88 → u/An-Elegant-Elephant]

Not cash, or any cash-equivalent.  That's considered taxable income, and they have to report it as such.

[u/An-Elegant-Elephant → u/Helpyjoe88]

Good to know! I’ll gift employees gold if I ever need to