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I work directly for a sales rep on all his accounts for the past 15 years. He is not my manager, I just work directly with him. If he meets his monthly quota, he would give me a monthly bonus in my paycheck. Now, his pay structure is changing and the bonus can't go thru payroll. So,he wants to give me the bonus via gift card or cash. On a yearly basis my bonus could be from 10,000-16,000. Just depends what kind of year he is having. I read that the gift allowance is 15,000 for the IRS. Is this the best way to go?

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A bonus isn't a gift, even if it's paid with a gift card. It's earned compensation, and it gets taxed as part of your salary.

If it was a gift, the gift tax would be the responsibility of the giver, not the recipient.

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    With all that talk about cash -- "the bonus can't go thru payroll" -- , I'm suspicious (more than suspicious) that these will now be under the table payments.
    – RonJohn
    Dec 12 '20 at 19:48
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    @RonJohn — you’re probably right. Even so, it’s still taxable income. Dec 13 '20 at 0:12
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    Absolutely! And IRS might consider it contract work, requiring OP to pony up the 15.3% self employment tax in addition to income tax.
    – RonJohn
    Dec 13 '20 at 0:28
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    In the UK, this would be plain illegal under the Payment of Wages Act 1991. All payments which constitute "wages" must be recorded on a payslip which shows deductions for tax, etc. Of course there is no legal requirement for an employer to have a "payroll department," so long as it complies with the legislation and produces the correct paperwork. Payment of wages in the form of a gift card would probably also be illegal, unless it can be converted into cash at its face value (and in that case, why use a gift card at all?)
    – alephzero
    Dec 13 '20 at 1:04
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    @alephzero — it’s also illegal in the US, for pretty much the same reason. Dec 13 '20 at 1:08
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If the "bonus" is dependent on your (or your branch/company's) performance then it is legally considered wages. If the money is not included on a paystub and the applicable taxes withheld, that is considered fraud by the IRS.

"The bonus can't go through payroll" means that this person is trying to not pay taxes on your wages. They are trying to scam both the IRS and you. Even if they pay the bonus with cash, they must provide a pay stub showing the full amount and that the correct taxes have been withheld.

If the money really is a gift (this is not one of those cases), then the taxes would be the responsibility of the gift giver, not the recipient.

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  • Aren't wages generally deductible for the employer? More specifically, most employers would save more by deducting the wages from their taxable revenue than they would pay in FICA taxes. Something weird is going on here for sure.
    – stannius
    Dec 16 '20 at 21:57

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