Signing Bonus Paid After Year End

[Christine Roberts]

Employer offers signing bonuses to new employees but bonuses are not paid until after employee completes 90 day introduction period. For an employee hired in November, 2001, who completes her introductory period in February, 2002, would the signing bonus be included in her 2002 income, or the year prior?

[KIP KRAUS]

Christine:

I’m not an accountant or CPA, but it has always been my understanding that most individuals are on a cash basis accounting for income tax reporting. Therefor, if this person actually receives the payment in 2002 then she reports it as 2002 income. I’m not aware of any exception.

In addition, the way you describe the bonus one could argue that she not entitled to receive it in any event until 2002. Thus it was earned in 2002.