You can record a non-cash taxable fringe benefit in QuickBooks Online Payroll by pairing an additional pay type with an after tax deduction. Here's how that process works.
First, create the additional pay type. The pay type you choose will determine how the benefit is taxed and recorded on the T4, so I recommend checking out the taxability of pay types article at the end of this post to help you make your choice. To add a pay type:
Now add the deduction. The deduction offsets the additional pay so the benefit is recorded and taxed, but your employee doesn't receive cash for it. To add a deduction:
You're now set to run payroll with the fringe benefit. If this is a one-time thing for the employee, remember to go back into their settings afterward and remove the deduction.
The custom deduction will always debit a liability account based on the accounting preferences in your payroll settings. You will need to create a transaction outside of payroll to represent distributing the benefit, then credit this liability account to maintain accounting accuracy.
One way to do this is to create an Expense. When you fill out the transaction, set the Bank/Credit account to the account you used to fund the benefit. Then, add the liability account to the line item under the Account column.
To find out which liability account to use, check your payroll settings. Here's how:
Let me know if you need anything else!
How different pay types and deductions affect taxes and T4's: https://community.intuit.com/articles/1278212
Hi there Kavco,
Thanks for joining the thread and choosing QuickBooks Online Payroll to pay your employees! Setting up a standby charge or any type of employee deduction can certainly be done with the method outlined above. I want to provide you with some extra resources.
For more information on how to set up the standby charge and other deductions:
I'm also including an article that is specifically about pay types and deductions. It includes a great chart that breaks down the taxes (if applicable) for specific deduction types:
Once you set up a new employee deduction it will automatically be deducted from each cheque. If you only wish to use it from time to time, you can zero out the value while running payroll. Here's how:
If it is a one-time charge, feel free to remove it from your employee's profile once used by selecting your employee's name, finding step 6, and clicking the Garbage can next to the deduction you want to remove.
I hope this helps you get that standby charge set up and ready to go for your next pay run!
I have done a lot of test paycheques and compared the calculations with the CRA's payroll calculator. I think this thread is outdated.
The QBO function for non-cash Deductions/Contributions is all I needed to do for a Standby Charge calculation to be correct. I did not need to create a separate allowance.
The steps I followed are:
1. Payroll Settings/Deductions/Add a New Deduction/Contribution
2. Category: Taxable Benefits (non-cash)
3. Type: Company Vehicle
4. Description: Standby Charge - click OK
Then go to Preferences/Accounting Preferences:
5. Go down to Company Contribution Expense Accounts. I chose "I use different accounts for different groups of company contributions". I chose the expense account I had created in the payroll expense section.
6. Go down to Other Liability & Asset Accounts and IF QBO WOULD ALLOW AN EXPENSE ACCOUNT HERE then there would be no need for a journal entry to work around these benefits. So, instead I entered a Liability account "Other payroll deductions".
After I ran payroll I had to workaround by creating a recurring entry to debit my liability account and credit my expense account - thus having no effect on the company's financial statements in the end but the employee will have paid tax on the benefit.
Wow! that was a lot of research. There are no clear instructions anywhere about this...even in the payroll manual.
Hi there Kavco,
Thanks for taking the time to share the steps you took to record the contribution you were looking for! I can see you spent a fair bit of time on this and sharing this response will surely help others that come across this thread too.
I hear what you're saying about how it would be helpful to have a more straightforward process to create and record this kind of contribution, so I encourage you to submit feedback to our product development team. When you go through the steps in the How do I submit feedback? article, your comments are forwarded to the product development team for consideration as QuickBooks continues to grow and evolve.
Feel free to stop by Community again if you have other questions or methods you'd like to share. Your efforts are what make this forum a great place for users to find the answers to make managing their books easy.