Bonuses – The IRS requires bonuses to be taxed the same as wages. You must withhold payroll taxes from any year-end bonuses you give to employees. This includes social security, medicare, unemployment, and income taxes. Also, this rule applies even if you give bonuses in the form of gift cards. Below are some special rules that relate specifically to federal and state income tax withholding from bonuses:
- If the bonus is included with an employee’s regular paycheck, federal withholding should be calculated based off of the employees W-4. Arkansas withholding should be a flat 7%.
- If a separate bonus check is issued, you should withhold 25% for federal income taxes and 7% for Arkansas.
- If we currently process your payroll checks, all bonuses need to be processed by us in order to calculate your payroll tax correctly and avoid penalties.
Payroll Taxes – You should have received a letter from the Department of Workforce Services which says “2016 Experience Rating Notice” at the top. If we provide payroll services to you, please send a copy of this notice to our office.
Contract Labor – Make sure you have a Form W-9 for every individual and non-incorporated company which provided contract labor or other services to your company totaling more than $600 for the year. Get a blank W-9 here. Common services which get overlooked are:
- Cleaning Service
- Lawn Service
- Repairs and Maintenance Services
- Accounting Services
- Commission Expenses
- Rent Expense
ALL Lawyers and legal services (even if they are incorporated)