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