This article addresses the concept of grossing up a paycheck and touches on how to do this within the QuickBooks Desktop payroll platform.
Grossing up payroll means that you are going to pay an employee based on the NET wages and not on the gross wages.
Typically, when you process payroll, you already have a predetermined amount for the gross wages, based on either an annual salary or an hourly rate. Then you can simply let the payroll software determine the NET wage amounts based on the tax and other deductions taken out of the employee’s paycheck.
Grossing up payroll does this process described above, but only backwards.
It begins with the NET wages, calculates what the tax deductions should be, and then the software will arrive at a gross wage.
This method is useful if you want to pay an employee a solid NET bonus of a certain amount to be deposited into the employee’s bank account. But, keep in mind, the employee’s taxable GROSS bonus will probably be significantly higher and this gross information will be the information reported to the IRS.
So, if you utilize the QuickBooks Desktop payroll software and you want to proceed with grossing up an employee’s paycheck, here are the steps:
- Go to the payroll center and begin a payroll.
- Once you get to the screen called “Enter Payroll Information”, then click on the employee’s name who’s paycheck you want to gross up.
- At the bottom, put a checkmark next to “Enter net/Calculate gross”.
- Within the highlighted amount next to “Net Pay”, type in the exact net amount you want deposited into your employee’s bank account.
- Now tab on your keyboard and you will now notice all of the federal withholding and FICA/MEDI deductions have changed. Also you will notice the new GROSS wage amount at the top of this screen.
- Click Save & Close
- Proceed with the payroll wizard to process this paycheck.
Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.