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| Subject: Re: Oprah and tax trouble? | Date: 4/24/2005 2:43 PM | |
| Author: irasmilo | Number: 78932 of 121114 | |
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There is a complicated formula that would determine how much extra funds Oprah would have to give them so that the bonus + tax given to the recipient would result in zero tax to the recipient. It goes something like this: Bonus $5,000 X 20% tax = 1,000 Tax on $1,000 X 20% = 200.00 Tax on $200 X 20% = 40.00 Tax on $40 X 20% = 8 Tax on $8 X 20% = 1.60 And on and on until you get to zero. You may think it's complicated, but I would argue it's very simple. Using your 20% rate, the grossed-up amount is simply 5000/(1-.20) = $6250. Ira |
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