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$.$

B$.\frac{\text{\$}4,000}{0\mathrm{.}7035}=$$$5,685\mathrm{.}86$ grossed$-$up bonus

C$.$ Gross bonus amount

Federal income tax withheld

If state or local taxes apply, they must also be included in the formula.

$*$Need to subtract $$0\mathrm{.}01$ from $$5,685\mathrm{.}86$ in order to arrive at $$4,000\mathrm{.}00($due to rounding$).$

Nobody has capped for OASDI prior to the bonus check.

You may need to add one penny to the gross so that net bonus is exactly $$100\mathrm{.}00.$ Round your calculations and final answers to the nearest cent.

with Forms W$-4$ From $2020$ or Later with Standard Withholding and $2023$ FICA rates have been used.

a$.$ What will be the gross amount of each bonus if each employee pays a state income tax of $3\mathrm{.}01\%($in addition to the other payroll taxes$)?$ Round your calculations and final answers to the nearest.

$

b$.$ What would the net amount of each bonus check be if the company did not gross$-$up the bonus? Round your intermediary calculations to the nearest cent.

$

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b$.$ Gross pay minus deductions $=$ net pay. Use $22\%$ as FIT percentage on supplemental earnings.