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).

Youngston Company (a Massachusetts employer) wants to give a holiday bonus check of $750 to each employee. Since it wants the check amount to be $750, 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 Genna Fredrich if her earnings for the year are $55,920. Besides being subject to social security taxes and federal income tax (supplemental rate), a 5.1% Massachusetts 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
Massachusetts income tax withheld
Take-home bonus check	$