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
Line Item Description
Amount
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 $250 to each employee. Since it wants the check amount to be $250, 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 $250.00. Round your calculations and final answers to the nearest cent.
As we go to press, the federal income tax rates for 2024 are being determined by budget talks in Washington, and are not available for publication. For this edition, the 2023 federal income tax tables for Manual Systems with Forms W-4 From 2020 or Later with Standard Withholding and 2023 FICA rates have been used.
Line Item Description
Amount
Gross bonus amount
fill in the blank 1 of 6$
Federal income tax withheld
fill in the blank 2 of 6
OASDI tax withheld
fill in the blank 3 of 6
HI tax withheld
fill in the blank 4 of 6
Utah income tax withheld
fill in the blank 5 of 6$
Take-home bonus check
fill in the blank 6 of 6$
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