Example 4-12 GROSSING-UP. Cotter Company wants to award a $4,000 bonus to Donna D'Amico. In addition, it wants the net bonus payment to equal $4,000. Assuming D'Amico is still under the OASDI/FICA limit, the calculation would be: A. $4,000 1 – 0.22 (Supplemental W/H rate) – 0.062 (OASDI) – 0.0145 (HI) B. $4,000 = $5,685.86 grossed-up bonus 0.7035 C. Gross bonus amount $5,685.85* Federal income tax withheld 1,250.89 OASDI tax withheld 352.52 HI tax withheld 82.44 Take-home bonus check $4,000.00 If state or local taxes apply, they must also be included in the formula. *Need to subtract $0.01 from $5,685.86 in order to arrive at $4,000.00 (due to rounding). Damerly Company (a Utah employer) wants to give a holiday bonus check of $350 to each employee. Since it wants the check amount to be $350, it will need to gross-up the amount of the bonus. Calculate the withholding taxes and the gross amount of the bonus to be made to John Rolen if his cumulative earnings for the year are $46,910. Besides being subject to social security taxes and federal income tax (supplemental rate), a 4.95% Utah income tax must be withheld on supplemental payments. Enter deductions beginning with a minus sign (-). You may need to adjust by a penny (subtract or add) to the gross amount to get net pay to calculate exactly to $350.00. Round your calculations and final answers to the nearest cent. Gross bonus amount $ Federal income tax withheld OASDI tax withheld HI tax withheld Utah income tax withheld Take-home bonus check $
Example 4-12
GROSSING-UP. Cotter Company wants to award a $4,000 bonus to Donna D'Amico. In addition, it wants the net bonus payment to equal $4,000. Assuming D'Amico is still under the OASDI/FICA limit, the calculation would be:
| A. | $4,000 |
| 1 – 0.22 (Supplemental W/H rate) – 0.062 (OASDI) – 0.0145 (HI) |
| B. | $4,000 | = $5,685.86 grossed-up bonus |
| 0.7035 |
| C. | Gross bonus amount | $5,685.85* |
| Federal income tax withheld | 1,250.89 | |
| OASDI tax withheld | 352.52 | |
| HI tax withheld | 82.44 | |
| Take-home bonus check | $4,000.00 |
If state or local taxes apply, they must also be included in the formula.
*Need to subtract $0.01 from $5,685.86 in order to arrive at $4,000.00 (due to rounding).
Damerly Company (a Utah employer) wants to give a holiday bonus check of $350 to each employee. Since it wants the check amount to be $350, it will need to gross-up the amount of the bonus. Calculate the withholding taxes and the gross amount of the bonus to be made to John Rolen if his cumulative earnings for the year are $46,910. Besides being subject to social security taxes and federal income tax (supplemental rate), a 4.95% Utah income tax must be withheld on supplemental payments.
Enter deductions beginning with a minus sign (-). You may need to adjust by a penny (subtract or add) to the gross amount to get net pay to calculate exactly to $350.00. Round your calculations and final answers to the nearest cent.
| Gross bonus amount | $ |
| Federal income tax withheld | |
| OASDI tax withheld | |
| HI tax withheld | |
| Utah income tax withheld | |
| Take-home bonus check | $ |
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