Question

Need help solving this one!

Damerly Company (a Utah employer) wants to give a holiday bonus check of $175 to each employee. Since it wants the check amount to be $175, 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 (-). You may need to adjust by a penny (subtract or add) to the gross amount to get net pay to calculate exactly to $175.00. Round your calculations and final answers to the nearest cent. Gross bonus amount Federal income tax withheld X OASDI tax withheld X HI tax withheld X Utah income tax withheld X Take-home bonus check > Feedback Check My Work Divide desired net pay by: 1 (representing 100%) minus all tax rates (convert to decimals) that will be deducted from gross pay. This will give the required gross pay needed to give desired net pay. (Use 22% as FIT percentage on supplemental earnings.) Take the resulting gross pay and multiply by the respective tax rates to prove net pay. Note: due to rounding, the net bonus can be off by a cent. Add or subtract this cent to gross pay to ensure that once withheld taxes are subtracted, the net check equals the bonus amount.

Answer 1

Social Security rate	6.20%
Medicare rate	1.45%
Federal Income tax	22.00%
State income tax	5.00%
Total tax percentage	34.65%
Required gross bonus	267.79	=175/(1-34.65%)
Gross bonus amount	267.78
Federal Income tax withheld	-58.91	=267.79*22%
OASDI tax withheld	-16.60	=267.79*6.2%
HI tax withheld	-3.88	=267.79*1.45%
Utah Income tax withheld	-13.39	=267.79*5%
Take home bonus check	175.00