How Does Someone Gross up an Amount?
To “gross up” an amount, a person will need to find all of their deductions and add those deductions to the person’s salary in order to determine their individual net “gross up” amount. Most of the time, businesses or employees will gross up their salary and then receive the grossed up amount without taxes or other deductions taken out by the business.
Another example of when a gross up might be needed is when a business wants to give a cash bonus to an employee and has to gross up to ensure that deductions will not make the cash bonus lower. For example, grossing up on a $100 bonus so that the cash bonus will be exactly $100 instead of $93.
- Calculations For the initial calculation, a person will need to know the federal, state and local taxes for the period as well as the person’s full wages. To determine what the gross-up will be for a particular amount, follow this equation as found on the CheckMark site: “100 percent – tax percent (federal/state/local taxes) = net percent.” Then complete the second calculation of the payment divided by the net percent, which should equal the gross amount of earnings.
- Check work Double-check the work by calculating the gross to the net pay. Then add these amounts to see if the amount equals the gross up amount found in the first step. If it does, the equation is solved and the gross up amount is correct. If not, begin again.