sign-on bonus
I am a recent graduate and am currently negotiating a contract for employment. My future employer is offering a sign-on bonus of $3000 as an incentive to work at the company, contingent on employment for at least 2 years. I realize that this sign-on bonus would normally be considered income for tax purposes. However, since I have many student loans to repay, my future employer has offered to make the bonus check out to the financial institution that holds my student loans. He states that this will save me from paying income tax on the bonus. Is this true? Will I still have to pay taxes on the money, even though it is not coming directly to me? Is there any way to legally avoid the potential taxes on the bonus?
2 Answers from Attorneys
Re: sign-on bonus
Welcome to the world of gainful employment and the inevitable . . . income taxes. Yes, you must still report the bonus as income even if paid to your financial institution to pay down your student loan.
Good luck to you.
Re: sign-on bonus
Paying a debt on your behalf is the same as paying you directly -- taxable income, as you suspected. Employer is also wrongfully attempting to avoid paying employer's share of social security/FICA taxes. This will not survive IRS scrutiny.
Best wishes,
LDWG
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