A short Mike Minutes Mastermind video (June 29, 2022) in which Mike Andes answers a question from Nick (Marysville) about how to handle a first-time profit-sharing payout (5% for the quarter). Mike advises that if the payout exceeds $600 it should be run through payroll as a bonus and taxed normally; he also references a recently introduced IRS provision (described tentatively) allowing up to $600 in cash donations to employees to be deductible. The speaker notes he has not fully read the legislation and recommends running larger amounts through payroll.
Questions this video answers
5% for this quarter.
Up to $600 per year (speaker described this as a new IRS allowance).
June 29, 2022.
Chapters
Hello, Augusta Nation. Hope you're all doing super well. Let's go ahead and jump in. I don't have any big announcements. I have a couple part tomorrow. But let's go ahead and jump in. There was a question here from Nick that was good. I did look at this one.
Boom. Okay, so Nick from Marysville, I'm excited. I am paying out profit sharing for the first time, 5% for this quarter. My question is, should I just ask payroll team to include as bonus and still tax that amount? So in theory, yes, this is what we do.
However, there's a law that you might want to look into that is brand new. I did pull it up here, let me share this with you all. There's this new thing with the IRS that they are. They're allowing up to $600 in cash.
And you can still take a deduction. One second share screen. Here it is. All right, so I have not read in this a whole lot. I literally heard about it and then I've just recently pulled this. This window up. So don't judge me on this. I have not read the entire bill.
But typically the reason that you need to run it through payroll is because you can't take as a deduction or like an expense if you're not running it through payroll software and paying taxes on it. So typically paying, giving cash to your employees, it's a matter of your basically not able to write that money off as an expense. Most people do, but if you got audited, you would not be able to. So when it comes to. This is a new thing they came out with last year. Sorry, I'm messing up my windows one second. Basically up to $600 per year for cash donations.
Cash donations to your employees and you can still write that money off. So I still got to read through this because it's a long deal here. But based upon what I have heard, I have not dug into this one. You can do up to $600 in cash of donations to your employees and still write that off as wages. So I'm still looking at this, like I said. But this is potentially something you could do if you. If your profit sharing is less than 600. If it's more than 600, I just, yeah, 100% just put it as a bonus and tell. Tell whoever command center is running your payroll is telling hey, X amount as a bonus and then that will get taxed per usual. And most tax rates are the same for bonuses as well as hourly or P4P. It's just income. So it's going to be taxed pretty much the same exact way. So feel free to look at that one in depth a little more, Nick, if you want to know, know more about that $600 thing, but don't spend too much time on it. Literally, you're going to save yourself, you know, $100 or whatever it is.
Of taxes and save the employee some money, too, probably. But.
If it's more than 600, just run it through payroll, put as a bonus, and that's pretty much all you'll need to do. So it will be taxed as usual. So that is all I got for today, guys. That was the only question that came in. I'll probably have a couple announcements tomorrow.
Yeah, we'll stay in touch. And tomorrow I'll have a few more announcements at the beginning.
