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IRS Continues to Attack Accrued Bonus Plans
Posted by Michael Corrente on Tue, Sep 9, 2014 @ 10:04 AM

Businesses with annual employee bonus plans have long operated under the assumption that as long as they pay bonuses within 2 ½ months after the end of the year in which the bonuses are earned, the bonuses are deductible in the year earned, rather than in the year paid. While it is true that the "2 ½ month rule" must be satisfied in order to deduct the bonus in the year earned, other requirements must be met as well. The IRS has issued several rulings in the last few years illustrating how many bonus plans may fail these requirements. While these rulings may cast doubt upon the deductibility of many employers' current bonus plans, they also shed light on how to structure a bonus plan to withstand IRS scrutiny.

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Topics: tax issues, Michael Corrente, tax, IRS Updates, Bonus Plans

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