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Level 1

I need to generate a bonus that has no tax deducted from it. How would I do this?

I need to generate a bonus cheque for one of my employee's that is to be issued tax free.  I have a Request to Reduce Tax Deductions at Source form for CRA and the amount is going directly to a RRSP.  How do I generate this bonus cheque.

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Best answer March 11, 2019

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Level 3

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hello, Laurel!

You can use the Reimbursement pay type to pay an employee without withholding taxes. Here's how to to do this:

  1. In the left navigation bar, click Employees.
  2. Click the employee's name and hit Edit employee.
  3. Under How much do you pay this employee? click Add additional pay types if you haven't selected any other pay types, or click the pencil icon if you have .
  4. Check the box next to Reimbursement.
  5. You can edit the description that appears on the cheque by clicking the pencil icon.
  6. Click Done.

When you run payroll, you'll have an additional box for the new pay type. Any amount entered in that box will not be taxed.

However, you mentioned that the funds will be sent to a Registered Retirement Savings Plan. If so, you might want to consider adding a deduction to the cheque so the money isn't recorded as going directly to the employee.

When you run payroll, enter the the full, non-taxable amount in the Reimbursement box, then enter the same amount for the deduction. This will create a net zero cheque, and the funds will be held in a liability account.

When you pay the RRSP, you can record the expense against the liability account to balance your books. If you're not sure whether you should use the deduction, I recommend contacting an accountant.

You can find instructions here for how to set up a deduction: https://community.intuit.com/articles/1433855-set-up-employee-deductions-and-company-contributions.

For more information on which pay types are taxable, check out this article: https://community.intuit.com/articles/1278212-payroll-taxability-of-deductions-and-pay-types-canada-....

Feel free to reach out to me if you have more questions!

Sharon

View solution in original post

3 Comments 3
Highlighted
Level 3

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hello, Laurel!

You can use the Reimbursement pay type to pay an employee without withholding taxes. Here's how to to do this:

  1. In the left navigation bar, click Employees.
  2. Click the employee's name and hit Edit employee.
  3. Under How much do you pay this employee? click Add additional pay types if you haven't selected any other pay types, or click the pencil icon if you have .
  4. Check the box next to Reimbursement.
  5. You can edit the description that appears on the cheque by clicking the pencil icon.
  6. Click Done.

When you run payroll, you'll have an additional box for the new pay type. Any amount entered in that box will not be taxed.

However, you mentioned that the funds will be sent to a Registered Retirement Savings Plan. If so, you might want to consider adding a deduction to the cheque so the money isn't recorded as going directly to the employee.

When you run payroll, enter the the full, non-taxable amount in the Reimbursement box, then enter the same amount for the deduction. This will create a net zero cheque, and the funds will be held in a liability account.

When you pay the RRSP, you can record the expense against the liability account to balance your books. If you're not sure whether you should use the deduction, I recommend contacting an accountant.

You can find instructions here for how to set up a deduction: https://community.intuit.com/articles/1433855-set-up-employee-deductions-and-company-contributions.

For more information on which pay types are taxable, check out this article: https://community.intuit.com/articles/1278212-payroll-taxability-of-deductions-and-pay-types-canada-....

Feel free to reach out to me if you have more questions!

Sharon

View solution in original post

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Level 1

I need to generate a bonus that has no tax deducted from it. How would I do this?

When I submit payroll why is it not generated to my reconciliation

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QuickBooks Team

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hello sdtaylor58,

 

It's great to hear that you're using QuickBooks Online with one of the Payroll modules! I love that you've chosen our products to help manage your business's books, and it's important to me that you have a clear sense of what's going on when you're using the features. I'll get you started.

 

When you run payroll in QuickBooks Online, it creates the related transactions in your chart of accounts. If you're not sure where your payroll transactions are mapping to, you can check out the account setup for payroll by following these steps.

 

Account mapping for Standard Payroll

  1. Select the Gear icon.
  2. Choose Payroll settings.
  3. Click Accounting under the Preferences heading.

Account mapping for Advanced Payroll

  1. Select the Gear icon.
  2. Choose Advanced Payroll settings.
  3. Click Chart of Accounts from the left menu.

One of the reasons your transactions might not be appearing in your reconciliation is if you don't have the chequing account set up for your bank account. For instance, in Standard Payroll, the program will create a "Payroll Wages" chequing account for you, and you'd need to go in and change that account to have it go to the one you need.

 

If that's what's happened here, there are two ways to fix this.

  1. Use a journal entry or the transfer feature to move the funds from one account to the proper one (Note: You can do one lump sum or multiple transactions in order to make sure the dates are correct for the transactions).
  2. Merge the current account where the wages are to the bank account you need (Note: Only do this if there aren't other transactions in the current account that you wouldn't want to be in the bank account).

To get a hand with these options or to troubleshoot further if what I've gone over isn't the case for your account, contact support using one of the following options.

 

Schedule a Callback or Chat: click (?)Help in the upper right > click Contact Us > explain your situation > click Let's Talk > choose Get a callback or Start a Chat

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All the best to you!