Gross Up

DEFINITION of 'Gross Up'

A practice usually in reference to an employer reimbursing a worker for the taxes paid on some portion of their income, usually from a one-time payment such as relocation expenses. In other words, if an employee is promised $5,000 for relocation expenses, the actual check might be issued for $6,500. This would leave the promised $5,000 after the required taxes had been deducted.

BREAKING DOWN 'Gross Up'

Grossing up can be one of those gifts that comes back to haunt you. Depending on how a company calculates the gross up, an employee may still end up owing money at tax time. To ensure that there are no surprises for the employee, the employer should use a tax professional to account for all the employee's income and deductions for the entire year, not just the amount of the check being grossed up.

RELATED TERMS
  1. W-2 Form

    The W-2 form reports an employee's annual wages and the amount ...
  2. Withholding Allowance

    An allowance an individual claims on a W-4 Form. A withholding ...
  3. Gift Tax

    A federal tax applied to an individual giving anything of value ...
  4. Income Tax

    A tax that governments impose on financial income generated by ...
  5. W-4 Form

    A form completed by an employee to indicate his or her tax situation ...
  6. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
Related Articles
  1. Taxes

    Small Business Tax Obligations: Payroll Taxes

    Don't leave it up to your accountant - owners are ultimately responsible for fulfilling tax obligations.
  2. Personal Finance

    Don't Sign That Non-Compete Without Reading This

    Non-compete contracts aren't just for high-level execs these days. How to protect yourself if your employer – or prospective employer – insists you sign one.
  3. Economics

    Why Enron Collapsed

    Enron’s collapse is a classic example of greed gone wrong.
  4. Investing Basics

    Corporate Dividend Payouts And the Retention Ratio

    An investor can use dividend payout and retention ratios to gauge an investment’s possible return, and compare it to other stocks.
  5. Investing News

    How Banning Buybacks Would Help the Economy

    Stock buybacks are popular, but they're not helping the economy. Here's what would happen if they were banned.
  6. Credit & Loans

    Just Hired? How to Navigate Your New Job Benefits

    Being new at a workplace is nerve-wracking enough. Here's what to do first after you've been hired to better navigate complicated benefits plans.
  7. Economics

    How Leadership Impacts Investments

    Investors often overlook a company’s leadership when evaluating an opportunity, but it’s an important quality to consider.
  8. Mutual Funds & ETFs

    Make Employees Happier with This Simple Tip

    Offering socially responsible options is a good way to increase employees' sense of satisfaction, which can lead to improved morale among other things.
  9. Professionals

    Split Dollar Life Insurance: How it Works

    Understanding how split dollar life insurance plans are designed and what tax regulations they must follow.
  10. Economics

    Explaining Incorporation

    Incorporation is the process of legally becoming an entity that is separate from its owners.
RELATED FAQS
  1. Why does the IRS withhold income taxes from employee paychecks?

    In the midst of WWII, the U.S. government ran into trouble funding the war effort. The problem did not originate from citizens ... Read Full Answer >>
  2. If an employee is paid by commission, who is responsible for withholding taxes?

    It depends. An individual who receives commissions can be treated in the same manner as an individual who receives straight ... Read Full Answer >>
  3. Can LLCs have employees?

    A limited liability corporation (LLC) can have an unlimited number of employees. An employee is defined as any individual ... Read Full Answer >>
  4. Do flexible spending accounts (FSA) funds roll over?

    An individual can utilize an employer’s cafeteria plan of employee benefits to establish a flexible spending account (FSA). ... Read Full Answer >>
  5. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>
  6. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center