It increases the amount of Short- and Long-Term Disability payments received.It can help cover the cost of obtaining personal health insurance.It covers the actual costs of one-time expenses (moving, travel, other reimbursements, etc.).More take-home pay is received and fewer taxes are paid.Job candidates may be more likely to go with a company that offers formal health benefits.If used to help with health insurance costs, it can end up being more expensive than simply offering health insurance benefits.This is especially difficult when the company grows and adds more employees. It’s hard to offer this benefit only once, as employees will begin to expect it again and again.It takes a few more steps to calculate and get the correct gross pay.It can be a way to help employees afford personal health insurance if the company doesn’t offer group coverage.It helps lower employees’ tax burden, which in turn can increase employee satisfaction and encourage loyalty.There are some definite pros and cons of grossing up salary or other payments, both for employers and employees. What Are the Pros and Cons of Grossing Up Salary? An employer wants to ease the tax burden of an employee receiving Short-Term or Long-Term Disability payments.In this case, the gross-up is meant to help employees cover their personal health insurance. The employer can’t afford, can’t meet minimum participation requirements, or doesn’t know how to implement group health insurance.It’s included in a compensation plan (generally for executives).An employer is contracted to pay an employee a specific net salary. An employer pays for an employee’s relocation expenses.An employer wants to give an employee a specific amount, which the employee wouldn’t normally receive because of tax withholdings.Learn More When Might an Employer Offer a Gross-Up to Employees?Įxamples of when an employer might offer a gross-up payment to employees: Now Cecil doesn’t owe any income taxes on his reimbursement. This is because The Jones Company didn’t only pay for his moving expenses, but also for the withholding tax Cecil would normally owe on the $3,000 benefit he received. Cecil receives the relocation reimbursement on his paycheck, but when he looks at his paystub, he notices that the amount paid to him equaled $4,000. The Jones Company relocates Cecil to Texas and pays for his moving expenses, which totaled $3,000. To help illustrate gross-up, here is a common example: When this happens, gross-up merely restates the salary as net instead of gross salary (before tax withholding). However, there are times when it is used to meet a specific annual net salary. Gross-up is optional and is usually used for one-time payments. For married filing joint individuals, each spouse will need to log into their own online account or review their own letter for their half of the total payment.Gross-up is additional money an employer pays an employee to offset any additional income taxes (Social Security, Medicare, etc.) an employee would owe the IRS when that employee receives a company-provided cash benefit, such as relocation expenses. You will need the total payment information from your online account or your letter to accurately calculate your Recovery Rebate Credit. Letter 6475: Through March 2022, we'll send this letter confirming the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021. Notice 1444-C: Shows the third Economic Impact Payment sent for tax year 2021.Notice 1444-B: Shows the second Economic Impact Payment sent for tax year 2020.Notice 1444: Shows the first Economic Impact Payment sent for tax year 2020.IRS EIP Notices: We mailed these notices to the address we have on file. Your Online Account: Securely access your individual IRS account online to view the total of your first, second and third Economic Impact Payment amounts under the “Economic Impact Payment Information” section on the Tax Records page. To find the amounts of your Economic Impact Payments, check: Depending on whether you missed the first, second or third payment, you will need to file either a 2020 or 2021 tax return to claim a Recovery Rebate Credit. It is important to understand that the Economic Impact Payments applied to different tax years. You may be eligible to claim a Recovery Rebate Credit on your 2020 or 2021 federal tax return if you didn't get an Economic Impact Payment or got less than the full amount. You can no longer use the Get My Payment application to check your payment status. The IRS has issued all first, second and third Economic Impact Payments. To find the amount of Economic Impact Payments issued to you, see your Online Account.
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