Footwedge;1067033 wrote:Bonuses are paid to minimize federal tax liability? Really? Bonuses can and are paid to reduce corporate taxes...not personal income taxes.
The chump-change bonuses you get, maybe. For most people bonuses are, first and foremost, a performance incentive/reward. And for large bonuses, especially on the exec level, employees often do have options that enable them to manage their tax liability (such as receiving a large chunk as an employer 401k contribution). It could also have been paid in the form of company stock or options, in which case she can pay a capital gains rate if and when she exercises/sells. It's called deferred comp, and at higher levels employees often have options to defer part or all of the bonus in various forms.
I've never seen corporate tax rates as a driver of bonus payouts. That's just ignorant. For starters, the tax treatment is the same whether it's a cash bonus or or normal salary. Second, PROFITABILITY is usually the key determinant in deciding if bonuses will be paid. I mean, you do realize it's more costly to the corporation to pay a bonus then the additional taxes they'd incur from the incremental profits? That's a rhetorical question - we all already know the answer.
