Employer did not apply any tax to bonus check! What do I do?

Question

My husband was hired recently under several conditions: He receives $400 per month for health care (separate check from his regular pay) and $500 per month as a bonus (also separate check from his regular pay). Neither of these checks have been taxed!?!?

Shouldn't these checks be taxed as income? What is this employer doing? Does my husband have to apply the taxes himself? If so, what form should he complete?

I'm so confused and frustrated. Neither of us have been in this situation before. He's been working at the company for 3 weeks. UGH!

Answer 1

It appears that your employer will report health care and bonus income on 1099-misc. It will be treated as independent contractor or self employed income, which is reported on schedule C or C-EZ (Form 1040).

How you will treat the 1099-Misc income, read: http://taxipay.blogspot.com/2008/03/w2-o...

Answer 2

He also collects a regular check that is taxed? It does sound strange to not apply the tax to the other checks. You might start by asking them to do so. Bonus checks normally have taxes with held, not sure about a check to cover healthcare, that might be not taxed on purpose (it might be tax deductible).

If they can't or won't withhold from the bonus check, you might just up the withholding from the regular check to make up the difference, or estimate the tax that you will have to pay on the bonus check and deposit in the savings account until tax day when you will have to send it to the IRS (in the latter scenario you get the benefit of collecting some interest on this money in the interim).

Answer 3

What Jss suggests is probably what the employer has in mind, but it's not legal for them to do it that way.  If he is an employee, then the bonus is also treated as given to an employee, and the employer must pay their share of employee taxes on it.  It's possible that the medical is set up as being pre-tax, but then there would be no reason for it to be on a separate check..

He should ask the employer about the medical, and the bonus.  He should also be looking for a different job - this employer is bad news.