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End of Year Bonuses

Picture of The Kaizen Team The Kaizen Team · November 28, 2023

payroll + hr compliance business & tax strategy

Unlock the secrets to maximizing your year-end bonuses while optimizing your tax position! In this episode of Kaizen Time, we break down the strategies that can put more money in your employees' pockets and create a better financial position for your business.

Discover how creating a bonus pool based on employee compensation can be a game-changer for your taxes. Whether it's a percentage of salary or tied to individual achievements, we guide you on determining the most comfortable percentage of income to pay.

But wait, there's more! Explore the alternative route of using a profit-sharing plan for bonuses. By contributing to a retirement plan like a 401(k), you not only enjoy tax deductions but also sidestep FICA tax, saving you an extra 7.65%. Employees? They save anywhere from 12% to 37% on taxes, depending on income level. Now that's a win-win!

Dig into the details of profit-sharing contributions, including vesting schedules that serve as retention tools and encourage employees to save for retirement. Regularly review your financial portfolio and retirement plans with a financial advisor to ensure you're on the right track.

Bonus tip: Learn how to navigate the tax implications of bonuses. Discover the difference between treating bonuses as regular income and having them taxed separately at a lower rate.

This episode equips small businesses with the insights needed to reward employees, reduce taxable profit, and create a solid financial foundation. Ready to make the most of your year-end bonuses? Let's dive in!

Do you have questions we can answer or topics you'd like us to cover? Send us an email: bsb@kaizencpas.com

Kaizen CPAs works with auto repair shops across the country. We know running a successful shop takes more than keeping the bays full. We help shop owners understand their numbers, stay ahead of taxes, and build stronger, more profitable businesses. Auto repair is at the heart of what we do, but we bring the same practical, hands-on approach to businesses in other industries, too.

YPD HCM is part of the Kaizen CPAs family. YPD HCM helps small businesses manage payroll, HR, and compliance with the right tools and personal, human support—from payroll and tax filings to onboarding, employee management, and more. It’s practical help for the people side of your business, from a team that’s there when you need them.

The information in this article is provided for general educational purposes and reflects conditions as of the publication date. It is not legal, tax, accounting, payroll, HR, or compliance advice. Every business is different, so talk with a qualified professional about your specific situation.