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Show Notes and Resources:
- Gay Wise of Wise Financial (WF001) // https://youtu.be/gJ_IRWzQ3iw
- Samantha F (EHow001) // https://youtu.be/241mkUR0Ouk
- HR Over Coffee (HR360) // https://youtu.be/oKyaLYMc5Fo
- Alex S (CPA001) // https://youtu.be/-cV6o_Te6ME
- The Jill on Money Podcast (DGT) // https://www.listennotes.com/podcasts/jill-on-money-with/what-to-do-with-bonus-fDn39_pYyBv/
- NannyCast 22: Employee (mis) Classification // https://nannycast.com/post/184389227001/nannycast-22-employee-mis-classification-am-i
- IRS Publication 525 // https://www.irs.gov/forms-pubs/about-publication-525
- Facebook Post Soliciting Questions // https://www.facebook.com/NannyCast/posts/5027126464004940
(CPA001 cold open)
If this sounds like you, first, happy holidays. Wait, but NannyCast episodes are evergreen. How did we know that you are listening to this around the holidays? Because of the topic of course! Today’s episode is all about that holiday bonus … or is it a gift?
As with so many of our financially related episodes, this one is only truly applicable to nannies working in the United States of America. If you are working in a different country, you are going to have to ask your tax professional about how your country approaches additional compensation at the holiday season and so we’ll see you in the next episode.
For the rest of us, let’s proceed on! For that cold open you heard …
(CPA001 introduction of self)
Also on this episode are going to be the voices of …
(WF001 introduction of self)
(Ehow introduction of self)
(HR360 introduction of self)
(DGT introduction of self)
… as well as computer-voiced questions sent in by our listeners. To find out about our open calls for questions, you will need to follow our Facebook page over at Facebook dot com slash NannyCast and make sure not just to like the page but to set it to show posts in your feed. We don’t post often, less than once every two months, but when we do it is always something to pay attention to.
(Question 1 by Nanny A)
Unfortunately not. If you remember back to Episode 22 on Employee (mis) Classification, we learned that despite what we want to tell ourselves, the IRS usually has some pretty stringent rules about things. Well, the same applies here too. By the way, if you haven’t heard Episode 22, there will be a link to that in our show notes over at NannyCast dot com or hopefully appearing in the app that you use to listen to podcasts; give it listen.
According to the US Department of Labor and the IRS, whose sources are cited in the show notes, any payment made in addition to the employee’s regular earnings is a bonus. (https://www.dol.gov/agencies/whd/fact-sheets/56c-bonuses)
(HR360 clip introducing bonuses.)
And further …
(HR360 clip about bonuses being a gift)
… employee bonuses are always taxable to employees as an employee benefit, no matter how or when they are paid. (https://www.thebalancesmb.com/giving-employee-bonuses-know-the-tax-implications-397631)
(bonuses have tax implications for the giver and receiver @ HR360)
(bonuses are taxed no differently than regular salary @ CPA001)
(nowhere in IRS codes that say bonuses are cheaper tax or tax free @ CPA001)
(uncle sam doesn’t care whether your income was a bonus or a base salary @ CPA001)
“If you are paid your holiday bonus in a separate check from your regular pay, your employers should be withholding a flat 22% .” (https://www.thebalancesmb.com/giving-employee-bonuses-know-the-tax-implications-397631)
(Question 2 by Nanny N)
Sad news Nanny N. This one is going to also be taxed even though it isn’t cash.
(IRS Publication 525 rules on all gifts from employers whether they are taxable or not @ EHow001)
(why the IRS cares @ EHow001)
Did you hear her just mention gift certificates? Yeah. That’s in the IRS’s Publication 525 which we will link to in the show notes of this episode.
(so many things about the tax code don’t make sense @ DGT)
But there is hope.
(nominal gifts are not taxable @ Ehow001)
(de minimus fringe benefits aren’t taxable @ HR360)
What on earth is a “nominal” or “de minimus” gift, anyway?
(explain what “nominal value” means to make EHow001 make sense // actually a clip in the sound file so roll with it @ EHow001)
(if we receive $100 in money that’s a taxable benefit @ WF001)
So cash is taxable, a bonus, and not a gift. A gift certificate is taxable, a bonus, and not a gift. And anything that can be easily converted to cash – whatever that means – is taxable, a bonus, and not a gift. That eliminates a lot of what is usually gratitude-posted to the nanny support networks. However, we did get this very interesting question from an employer who listens to our show, and yes employers, we know you are part of the listening audience:
(Question 3 by Margaret)
(and I can answer that question for you @ WF001)
(there are many ways to give a gift to employees @ WF001)
(for meals only allowed to comp $100 of food and drink combined per employee but tax deductible as a business expense for employer (WF001) and employee doesn’t have to report as taxable income)
(can have six such (above listed) events per year @ WF001)
So that means our employers can spend up to $100 for NNRW and $100 for our nannyversary and $100 for nanny’s birthday and still have 2 other meals that are fully tax deductible to our employers and also not going to cost us anything in taxes. Sweet!
(we can get a nice gift worth up to $500 per year so long as it isn’t a taxable benefits type gift such as a gift certificate without having to pay taxes on it @ WF001)
(can receive a “long service award” of up to $500 but only every five years @ WF001)
Pardon the music overtaking the end of the aforementioned words, but that is the way the audio came.
(if you are going to get a gift from your employer, food is the way to go @ EHow001)
(the gift of time @ HR360)
Let’s talk now about those bummer posts on the nanny support networks where a nanny was looking forward to or counting on a holiday bonus, as we now know the cash payment to be, and the employers don’t pay one that year. The following audio is provided for employers, but it helps us to know what their best practices are.
(what parents should do if they aren’t going to give a bonus @ HR360)
So that tells us that we can completely ignore the advice to be grateful for any bonuses we do receive and so not mind the leaner years. We are fully entitled to our feelings of ingratitude if we aren’t compensated as usual, especially if it happens without communication from our employers. To anyone saying to suck it up, send them to this NannyCast episode … number 45 for reference.
(Question 4 by Nanny E)
(Jill on Money Podcast gives places to spend a bonus for someone without sufficient savings. @ DGT)
That previous audio came from the Jill on Money podcast which introduced themselves at the top of the show. Their podcast is entirely financial advice so if this portion didn’t help you, you can always write in to them to get your own personalized advice.
(our email address is @ DGT)
And we are out of questions and material for this episode. If you would like to get in touch with us to have a robot read out your anonymous question, head over to NannyCast dot com and click on contact us and type in your question anonymously. If you have a question and are brave enough to use your own voice, then the Send a Soundbite is the option for you.
(wash your hands @ DGT)
We look forward to seeing you next time with our next episode that is more useful Nanny Human Resources material. And happy holidays. All of them. Every single holiday. May they all be happy for you.