For the problem use the following steps a c to compute the gross-up amount:

a) Compute tax rate: The tax rate on bonuses is 22 percent. The Social Security (6.2%) and Medicare taxes (1.45%) must be added to this rate. For bonuses, the total tax rate equals 22% + 6.2% +1.45%, or 29.65%.

b) Subtract 100% - Tax rate percentage to get the Net tax rate. For bonuses, it is 100% - 29.65%, or 70.35%

c) Gross-up amount = Net pay / Net tax rate. For example, if you want the employee to receive a $150 bonus, the equation is $150 / 70.35% = $213.22

(Note: Typically voluntary pre-tax and post-tax deductions are not withheld from bonus checks.)

Vicky Le, an employee of Sweet Shoppe Industries, receives a bonus of $5,000 for her stellar work. Her boss wants Vicky to receive $5,000 on the check. She contributes 3% of her pay in a pre-tax deduction to her 401(k). Calculate the gross pay amount that would result in $5,000 paid to Vicky.