Question
Note: In this chapter and in all succeeding work throughout the course, unless instructed otherwise , calculate hourly rates and overtime rates as follows: 1.
Note: In this chapter and in all succeeding work throughout the course, unless instructed otherwise, calculate hourly rates and overtime rates as follows:
| 1. | Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimal places (round the hourly rate to 2 decimal places before multiplying by one and one-half to determine the over-time rate). | |
| 2. | If the third decimal place is 5 or more, round to the next higher cent. | |
| 3. | If the third decimal place is less than 5, simply drop the third decimal place. | |
| Examples: | Monthly rate $1,827 Weekly rate ($1,827 12)/52 = $421.615 rounded to $421.62 Hourly rate $421.62/40 = $10.540 rounded to $10.54 O.T. rate $10.54 1.5 = $15.81 | |
Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow.
Example 4-10
GROSSING-UP. Cotter Company wants to award a $4,000 bonus to Donna DAmico. In addition, it wants the net bonus payment to equal $4,000. Assuming DAmico is still under the OASDI/FICA limit, the calculation would be:
| A. | $4,000 |
| 10.25 (supplemental W/H rate)0.062 (OASDI)0.0145 (HI) |
| B. | $4,000 | = $5,939.12 grossed-up bonus |
| 0.6735 |
| C. | Gross bonus amount | $5,939.13* |
| Federal Income Tax withheld | 1,484.78 | |
| OASDI tax withheld | 368.23 | |
| HI tax withheld | 86.12 | |
| Take-home bonus check | 4,000.00 |
If state or local taxes apply, they must also be included in the formula.
*Need to add $0.01 to $5,939.12 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 $46,910. Besides being subject to social security taxes and federal income tax (supplemental rate), a 5% Utah income tax must be withheld on supplemental payments.
Enter deductions beginning with a minus sign (-).
Gross bonus amount$
Federal income tax withheld
OASDI tax withheld
HI tax withheld
Utah income tax withheld
Take-home bonus check $250
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