Does your boss give cash bonuses or are you a boss who gives cash bonuses? Read this:

While getting the cold, hard cash might seem great but if you’re ever audited—they might be too, and that money had better be properly reported on your earnings and wage reports for taxes. If an employer shows you were paid and you don’t show it on your 1099 or W2, you’re facing federal crimes and prison time as well as fines for days and decades. If you don’t properly report it from either party, the same is true. So if you’re doing everything on the level and by the law, is cash best then? Not really.

For starters, if you haven’t maxed out your 401k contributions for the year, you should have your employer contribute directly towards it and avoid that portion (or all if you’re below the limit) from being taxed at all. You can also defer your payment until after the New Year to avoid it being added to your annual taxable income, especially if your boss issued it on your payroll as part of your regular paycheck added together—that’s more taxes too. You can have part of it paid for the holidays and part of it afterwards to lower the tax implications and put the rest towards your 401k for next year or towards your Roth IRA, charitable contributions, etc. It’s also sometimes just better to have it put in your 401k and health savings accounts—more on that later. This is why it’s important to talk to a tax strategist AND have a separate CPA. They’re not often trained and educated the same, though they claim to be, and they get paid differently. Most CPAs also aren’t as savvy and working with you all year just on strategy do have both and make sure your CPA is getting the receipts to whatever your strategist has your money in.

Secondly, cash is so much more tempting to spend than putting it into your IRA, ETFs, HYSAs, or other investments. It’s just not easy for most people to fight the temptation to spend and blow it all. Have it direct deposited into your accounts that aren’t connected to your debit card!

Third, a boss giving an undocumented cash bonus and you taking it as such is tax evasion in both cases so don’t do it! Don’t accept without a W2 stub or reporting it to your accountant ASAP.

Fourth, if you qualify for an HSA Health Savings Account, have your employer set one up right away and have the money put there. It’s never taxed!! It must be used properly but it’s way better than paying for regular insurance that is a waste of money, overpriced, and denies most of your expenses so you pay out of pocket anyway. Choose a HDHP high deductible health plan and then go this route.

Fifth, if you are issued a proper cash bonus, understand it is indeed taxed one way or another to be legal. It might already have tax withholding through your employer or you must declare it, especially if you have other filings besides a W2 form. Talk to a CPA and have them get everything straight so you’re not audited and in big trouble—or your company. Then, invest what you can or pay off debts and use it to your advantage. You can also make some end of the year donations to reap organizations to save on taxes as well but get receipts.

If you’re an employer, make sure you’re helping your employees avoid tax increases—and punishment by audits—and put their money in the right places!! It’s a tax advantage for you too so make sure you’re consulting with a strategist as well to ensure your CPA knows all the ways to save—even the best ones don’t know it all. Get a second opinion!