Is your bonus plan eligible for accelerated deductions?
Abstract: Many construction businesses award performance or safety bonuses to employees at year end — yet may not be aware that it’s possible to deduct bonuses on their 2013 tax return even if they don’t make the payments until 2014. Accrual-basis taxpayers can take accelerated deductions even if they don’t calculate the amount of the bonus pool or specify who will receive bonuses until after the end of the year. But it’s important to follow IRS rules, which this article examines. A sidebar notes special rules for owner bonuses.