Gross Up

What is 'Gross Up'

Gross up is 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.

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