Ending Support for Grossing Up Payments

Sent to the KFS-Update Mailing List on Sept. 27, 2018

Beginning on Oct. 1, Accounting and Fiscal Services will no longer “gross up” honorariums and other non-wage service payments for campus units. Grossing up refers to the practice of increasing the gross amount of a payment to cover the amount of a payee’s tax withholdings. Departments that wish to gross up a payment will be expected to calculate taxes and increase the gross amount of the payment as needed. Information about which payees are subject to tax withholding and the formula for calculating a gross up can be found on the Withholding on Nonwage Service Payments page.

To ensure that the recipients of honorariums and other non-wage service payments are aware that their payments may be considered taxable income, the Accounting Department encourages units to add a statement to future agreements stating as much. For example:

Tax Withholding Statement

Honorariums and other service payments may be subject to income tax withholding under Federal and state law. UCI’s central accounting office will automatically deduct taxes from your payment if it is required by IRS or California Franchise Tax Board guidelines. As a result, the net payment you receive may be lower than the pre-tax amount listed in this agreement.

Grossing up payments is a costly practice at the campus-wide level that is not commonly practiced at other institutions. Nor is it considered necessary as the recipient will ultimately receive credit for the amounts withheld to apply against their income tax liability when they file their income tax returns. For questions about how taxes are withheld from non-wage service payments, you can contact the Tax team at taxation@uci.edu.

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