Originally Posted by
HeavyDriver
The company will be reimbursed taxes also, soooooo?
I don't think so. I think it works this way:
Company payroll account is drawn down $10,000
|
|----> $6,000 to employee
|----> $4,000 to IRS in emp's name
[Company's payroll account is reduced by $10,000]
Employee decides to leave
|-----> $10,000 sent to employer
[Company's payroll is increased by $10,000]
At year end, company prepares a W-2, which shows the NET amount paid to the employee (i.e., it doesn't show the $10,000 bonus paid to the employee) and the FULL amount of taxes withheld and sent to the IRS in the employee's name.
When the employee files his taxes at the end of the year he will have a tax liability for all his earnings: the net from the employer who paid him the bonus, earnings from his new employer, and any other taxable income he may have earned. He will calculate his total tax liability, and will find one of three outcomes: 1) he will have overpaid his taxes and will get a refund, or, 2) he will have underpaid his taxes and will need to send the IRS a check, or, 3) he will have paid exactly the right amount of taxes. Outcome 3 is rare; he'll likely fall into 1 or 2, but the particulars of his personal tax situation will determine which it is.
I'm not a CPA, but I'm pretty sure this is how it works.