Damerly Company (a Utah employer) wants to give a holiday bonus check of $350 to each employee. Since it wants the check amount to be $350, 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.

$350

Explanation:

Calculation for the withholding taxes and the gross amount of the bonus to be made to John Rolen if his cumulative

Social Security rate6.20%

Medicare rate1.45%

Federal Income tax22.00%

State income tax5.00%

Total tax percentage34.65%

Calculation for the Required gross bonus

Required gross bonus=$350/(1-34.65%)

Required gross bonus=$350/1-0.3465

Required gross bonus=$350/0.6535

Required gross bonus=$535.57

Gross bonus amount$535.57

Federal Income tax withheld(117.82)($535.57*22%)

OASDI tax withheld(33.20)

($535.57*6.2%)

HI tax withheld(7.76)

($535.57*1.45%)

Utah Income tax withheld(26.77)

($535.57*5%)

Take home bonus check$350.00

Therefore the withholding taxes and the gross amount of the bonus to be made to John Rolen if his cumulative will be $350.00