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$.\frac{\text{\$}4,000}{1-0\mathrm{.}22(Supplemental\frac{W}{H}\text{r}\text{a}\text{t}\text{e})-0\mathrm{.}062(OASDI)-0\mathrm{.}0145(HI)}$

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

C$.$ Gross bonus amount

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.

and $2023$ FICA rates have been used.

$x$

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.

$x$

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Theck My Work

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