Discussion:Bonus Accruals
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Discussion Forum Index --> Accounting Questions --> Bonus Accruals
| 26 December 2006 | |
| Hi,I'm a newbie to the forum, not a CPA, and need some clarification about regular employee bonus accruals and payouts. Can a year end bonus be accrued in the last month of the fiscal year and paid out the following month? If so should it be JE'd and reversed the following month? Do I also accrue related payroll taxes as well? Or, does the bonus have to be paid out in the current fiscal year? Thank you to anyone who can help. | |
| 27 December 2006 | |
| Welcome here DND!!! Yes, you can accrue y/e bonuses to employees and then pay them out in the following year. Payroll taxes don't need to be accrued on the bonuses as payroll taxes are not paid until the p/r is paid, but certainly if you want accrual f/s or tax returns prepared on the accrual basis, then the employer's portion of the p/r taxes is also accrued.
When you pay out the p/r in the next month, the entry will be crediting cash and debiting accrued p/r. | |
| 28 December 2006 | |
| Why would there need to be a WC accrual? I thought WC was an insurance policy...
Or is it different amongst the States? Jeff | |
| 28 December 2006 | |
| WC IS an insurance policy, and I think RLB might have been alluding to accruing ALL p/r expenses...would be a separate accrual, but one in which if you are doing accrual tax/f/s preparation, then this too would be accrued on the bonuses :) | |
| 8 January 2007 | |
| WC is tied to salary expense, but there is an annual limit for corporate officers (at least in Fla), so in some cases no addditional accrual needed on officer bonuses. Also, for admin personel, and if company has a low rate, could be immaterial.
But still it is definitely something to consider. | |
| 8 January 2007 | |
| Welcome here Gators!!! By the way....Ohio is going to whip their butts tonight. I am a Florida gal too, but read em and weep!! hehe
Back to topic...bonuses are not necessarily subject to the w/c. If the employee is aware of the bonus and it is for work done then it would be another accrual, but most often no accrual is necessary for bonuses. | |
| 10 January 2007 | |
| Sandysea, so sorry I missed your post on Monday, but not so sorry about the results of the game!! Go Gators!!
I handle the workers comp audits at our company and they have allowed me reductions in payroll for severance, Group term life over $50k, and any excess over the officer limit, but they have never mentioned an exclusion for certain bonuses. That's new to me. Maybe different plans or different states have other rules. | |
| 10 January 2007 | |
| Yeah, the Gators whipped Ohio's asses...hehe
Really? Bonuses typically (if unknown by the employee that is) have typically not been included in W/C premiums. Could also be a type of bonus...I am going to check my next w/c audit for a client of mine and see if his y/e bonus was included in the p/r calcs for his w/c premium. Thanks for bringing that to my attention!!!! | |
| 2 May 2007 | |
| I think that RLB meant Unemployment Compensation instead of Worker's Compensation.
Fumio - The 2 1/2 month rule is: any accrual needs to be paid out within 2 1/2 months from the accrual date. Sandysea - bonuses are part of WC audits and included in compensation. Typically an officer is compensated well over the maximum amount that the WC rate is applied against. For the purposes of WC audits only compensation that has actually been received is included in the number. | |
| May 3, 2007 | |
| I agree bonuses are included in WC wages. According to our insurer all W-2 income is included. I was wondering how others handle the Health Insurance on >2% shareholders.
If included on the W-2 then it is pulled into the WC issue. This does not seem right. JoAnne | |
CSMargerum (talk|edits) said: | 19 February 2008 |
| What about accruing bonuses to shareholders. We are a small C-Corp., stock is owned 50/50 by father & son. Does this create a related parties issue that would prevent us from accruing a year end bonus to each of them? We like to bring the corp's net income down to a particular number by paying out any additional net income via payroll to the owners, but we never know what that number is going to be until we are a few weeks into the new year and everything from December has posted. We have always done accruals like this in the past, but we have a new CPA this year that says we can't do it. Is that right? | |
