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GROSSING UP BONUS CHECKS - 2013Many Employers want to give their employees “net bonuses” for a set amount. In order to accomplish this, you will need to “gross up” or increase the net by the amount of taxes that need to be withheld. Bonuses are subject to all taxes, but many employers do not want to withhold FWT or SWT taxes. The below calculation will show you how to calculate the net bonus when Employers want only FICA withheld. Net divided by (100% -tax %.) = GrossEX: An employer wants to pay a net bonus of $200 and withhold only OASDI & Medicare. OASDI is 4.2% of gross and Medicare is 1.45% of gross for a total FICA calculation of 5.65%Note: OASDI is normally 6.2%. The 2% credit is only for 2011100% - 5.65% = 94.35%$200 divided by 94.35% = $211.97 $211.97 is the gross to be entered.$211.97 * 4.2% = $8.90 OASDI, $211.97* 1.45% = $3.07 Medicare (total tax = $11.97)$211.97 – $11.97 = $200.00 net.Following is a quick guide to grossing up bonuses that include OASDI & Medicare only with FWT & SWH Blocked. If the employer wishes to include FWT & SWH as well, use the tax calculator. Some employers may want to use the Supplemental Federal tax rate of 25% & the state supplemental rate. To do so, just override the tax rate in check options in pay entry or begin new pay period. (Note: These calculations do not take into account the additional .9% Medicare taxes for individuals earning more than $200,000.00 annually). Net Gross Up Net Gross Up25.0026.49900.00953.8950.0053.00950.001006.8975.0079.491000.001059.89100.00105.991500.001589.82125.00132.482000.002119.77150.00158.992500.002649.71175.00185.483000.003179.64200.00211.973500.003709.59250.00264.974000.004239.53300.00317.964500.004769.48350.00370.965000.005299.42400.00423.965500.005829.36450.00476.956000.006359.30500.00529.946500.006889.24550.00582.937000.007419.19600.00635.937500.007949.12650.00688.938000.008479.07700.00741.928500.009009.01750.00794.929000.009538.95800.00847.909500.0010068.89850.00900.9010000.0010598.83VERY IMPORTANT: It is crucial that you ALWAYS pre-process the payroll or recalculate the checks to ensure that the net amounts are correct. The payroll system is constantly monitoring the YTD FICA amounts and has a .05 rounding factor built in. If you don’t pre-process or recalculate the checks, the net pay may be off by this .05 which will result in a correction run having to be processed. Pre-processing will also identify any employee’s who have additional federal and/or state withholding set up. ................
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