Joey Martel is an employee of Overclock Watches. His employer would like to give

Question

Joey Martel is an employee of Overclock Watches. His employer would like to give him a bonus and has asked you to gross it up to ensure that Joey receives the full amount of the desired award.

Required:
Which of the following should be considered in the denominator to compute the grossed-up amount? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

Income tax(es).unanswered

401(k) contribution.unanswered

Health insurance premium.unanswered

Social Security and Medicare taxes.

Explanation / Answer

Gross bonus = net bonus/(100% - tax% that needs to be withheld)

Social security, medicare taxes and OASDI are withheld.

In the denominator the income tax will also come into picture. Suppose an employee's net salary is 100,000 and tax rate is 20%. Thus gross salary for bonus will be = 100,000/(100-20%) = 100,000/80% = 125,000

Thus the answer is "income tax" and "social security and medicare taxes" (the 1st and the last option).

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