Hello - I have a question....State Board of Equalization recently did a surprise visit to the salon and fined several of the hairdressers for different minor violations. The owner would like to open the salon on a Sunday and give all the proceeds to those stylists to help them pay their fines. Is there a way to give them the $ without them having to pay taxes? Can we just classify the payments under Penalties, since ultimately that is what the money is going to?
Hope you are well!
-m
-M-, Sorry for the problems that you had. I hope the fines were not too stiff. I have bad news for you regarding the very nice gesture that you want to do for your staff. Anytime an employer gives the employees cash, it is considered wages and is subject to federal, state, FICA and Medicare withholding. If the salon is the one that is being penalized then the salon should be the one paying the fines. If that were the case, then it would not be income to the staff. The penalties are not a deductible expense to the salon or to the employees. If you have any questions on this let me know.
It is a pleasure serving you.
Larry Kopsa CPA
Hope you are well!
-m
-M-, Sorry for the problems that you had. I hope the fines were not too stiff. I have bad news for you regarding the very nice gesture that you want to do for your staff. Anytime an employer gives the employees cash, it is considered wages and is subject to federal, state, FICA and Medicare withholding. If the salon is the one that is being penalized then the salon should be the one paying the fines. If that were the case, then it would not be income to the staff. The penalties are not a deductible expense to the salon or to the employees. If you have any questions on this let me know.
It is a pleasure serving you.
Larry Kopsa CPA
