Press Room: Article

February 22, 2010

The Tax Treatment of Bonuses Presents Audit Exposure to Businesses

A company’s treatment of bonus accruals may create IRS audit exposure for accrual method taxpayers.

Under IRC Sec. 446, bonuses must meet an “all events test” to be accrued at year-end. The all events test requires that the bonus obligation be a fixed legal obligation at year end and the amount of that bonus obligation be determinable with reasonable accuracy…

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