What does it mean to gross up a paycheck? It’s the opposite of the typical payroll method whereby an employee is paid a gross amount and then incremental portions of money are withheld by the employer for tax purposes, social security and retirement/benefits contributions.
In the case of grossing up a paycheck, the paycheck is inflated by a specific amount so the employee receives a guaranteed, predetermined ‘net’ amount. This is the amount the employee takes home. When employers gross up paychecks it’s usually a one-and-done situation like to reimburse moving expenses or pay out a year end bonus. NOTE: Careful consideration should be made in regard to who will be paying the employee portion of the taxes and how that could affect the tax filing at year end.
“Only available to QuickBooks Desktop Payroll Enhanced and Assisted users” when you need a specific net amount for your employee’s paycheck. Intuit’s payroll overview how to gross up a paycheck:
Select employee > Open Paycheck Detail > Enter amount in earnings > Check ‘Enter net/Calculate gross > Save and Close
Very often this method of payment is used for C-level executive compensation or highly paid employees although in many cases, not without controversy as was seen during the 2008 financial crisis. (source)
Disclaimer: The information in this article is to only be considered general information and not professional advice. Always consult with a CPA or accounting professional before making any payroll and/or taxation decisions.