The total group benefit premium is 50:50 split. Employees contribution is deducted on his/her paycheck. How do I track the taxable benefit-employers contribution and for it to appear on the T4 slip(Box 14 Employment Income & Code 40 Other Information)?
Thanks contacting us on the Community, jbraun.
best way to set up a Taxable Group Benefit in QuickBooks Desktop is to set up a
Payroll Item as a Company Contribution.
Let's create the Taxable Group Benefit Payroll Item, to do this:
After the Payroll Item is created, you have to apply that to the applicable employee(s). To do this:
Once the Payroll Item is added to the applicable employee(s), it will automatically appear in the Company Summary section when you create a paycheque.By default, QuickBooks Desktop will only allow you to select one Tax Tracking box at a time. Unfortunately, you cannot select more than one at this time. You can create the item and manually calculate then change it within the T4 to whichever applicable Tax Tracking boxes.
Here on the Community, we're here to assist you with how the QuickBooks software works. Other members in the Community are welcome to respond. However if you're unsure of which Tax Tracking box or Taxes to select for the Payroll Item, my recommendation is to speak to another accounting professional such as a tax specialist, for how to handle taxes and how to address it.
Hope this helps guide you to the answers you're looking for.
All the best!Alen
I'll gladly help with this. With QuickBooks Online, you can create custom deductions in a few easy steps. Here's how:
If you're using QuickBooks Online Standard payroll:
If you're using QuickBooks Online Advanced payroll: follow the steps in this article to request a custom deduction to be added to your account.
Let me know if you have any other questions.
This works in QB Desktop as far as the Employee deductions for Tax CPP and EI, however the amounts processed through this taxable benefit code are not included in the Gross Payroll for the Period on the PD7A Summary. Likewise, any Employer expenses (such as Workers Compensation Premiums and Health & Education Tax) do not include the taxable benefit amount in the calculation.
If I run the T4 Summary and PD7A Summary for the same period, the Gross Pay amounts are not the same.
The difference is the amount that was processed through the Taxable Fringe Benefit Company Contribution payroll item.
Hi, my issue I am having is, I need to account for taxable benefit amount but not pay the benefit to the employee, they are not receiving money I only want the amount taxed. With the online help and assistance i received today it is reflecting as a payment on pay cheques not as a benefit. I am sure there was most likely a step that was missed in the set up. Any assistance would be appreciated.
It sounds like you have not set up a deduction to process on each person's pay to deduct the amount of the benefit added.
There should be 2 entries on the employees pay stub, one pay code paying the taxable benefit amount, adding it to gross earnings before calculating deductions, and another deduction code deducting that same amount.
The deduction code is just a regular deduction, it does not affect gross earnings at all.
In other words, the employees gross pay will be higher by the amount of the taxable benefit and then you deduct the same amount just like you would deduct for say a staff receivable charge.
thank you for your reply, the Quickbooks associate set it up for me today, and yes there is no deductible line set up. Please provide me with the steps to do so correctly. Thank you for your assistance.
Open up your "Payroll Item List"
At the bottom where it says "Payroll Item", click the down arrow and select "New"
Select "Deduction" and click "Next"
Enter a name for the deduction, I would suggest it be similar to the payment code that was added, but include "ded" or "deduction" in the name and click "Next"
You can leave the "Agency Name' and "Agency Number" fields blank or enter the appropriate info pertaining the the taxable benefit. For example if it was for employer paid group insurance benefits, the name could be "Great-West Life" and the account number could be the policy and division numbers.
Click the drop-down arrow at the "Liability Account Number" field and select the same GL account that was used for the new Payroll Addition Item that QB Associate set up for you, then click "Next"
Select "None" for the "Tracking Type" then click "Next"
On the "Taxes" screen, there should be NOTHING checked off, select the item to remove the check marks if there are any, then click "Next"
On the "Calculate Based on Quantity" screen, select "Neither" and click "Next"
On the "Gross vs Net" screen, select "Gross Pay" and click "Next"
On the "Default Rate & Limit" screen, leave the fields blank, the "Limit Type" can just stay at whatever it came up as as the default, and click "Finish"
Now that the payroll deduction code is set up, add this deduction code to every employee's profile that you added the taxable benefit addition code to, for the same amount as the taxable benefit code except as a negative amount.
I hope this helps!
What you are describing can all be accomplished through setting up a Company Contribution payroll item instead of a second Deduction item. The Company Contribution item allows for both your liability and your expense account to be handled in the one item. In the case of a non-cash taxable benefit, which I believe one of you were inquiring about, you link to two accounts under a sub-heading. Of course, top-level account should always be at $0.00. For example, we give a Tool Allowance Benefit to our employees.
My G/L is set up for all non-cash taxable benefits as follows:
The payroll item for my Tool Allowance is set up as a Company Contribution as follows:
It doesn't really matter which Limit Type you choose here, as there is no limit on this particular item.
Now you only have to use one payroll item to add the benefit to the employee's payroll, rather than two, and the two transactions are done in the background on your G/L - in and out to balance $0.00. This ensures there is a $0.00 effect to the G/L, but adds the amount to the employee's income and deducts the applicable taxes, as well as placing it in Box 40 on the T4.
I originally set up the taxable benefit as a company contribution, as you are suggesting.
However, by setting it up this way, the amount of the taxable benefit did not get included when calculating the Health & Education Tax expense due from the Employer to remit.
When doing my annual return for Health & Education Tax, my remittances were short by the amount that should have been remitted on the taxable benefit.
I understand what you're saying, but the transaction that deals with the tax is not the same transaction as your taxable benefit. In fact, there is no tax implication from giving a taxable benefit to your employee other than you having to include the 'value' of the PST, along with the value of the benefit.
For example, when I allocate a Tool Allowance taxable benefit to my employees, the amount I pay for the good or service that I'm giving them a TB for, is entered into a bill from my vendor, just like any other expense. I have a G/L account called Man/Mech which just covers Manual/Mechanical tools. I pay for some tools for the employee. I purchased the goods from Vendor A, enter the bill, posted to Man/Mech, with applicable tax codes. The E&H tax and the GST owing for that good is recorded in that transaction. The E&H I pay on this item is not a remittable tax . . . it is simply part of your expense, coded to the same G/L account as the item you purchased (If you have QB set to track PST as an expense. If you have it set to track in a separate expense account, then it will be there).
But now I am going to give that item to my employee as they want to use it against their Tool Allowance, which is a TB. Accounting creates a slip indicating that such and such an item was given to Employee John Doe, indicating the pre-tax amount that was paid on the vendor's invoice. I take the pre-tax price of the item, add the E&H to the base price, and then enter the total under the Tool Allowance payroll item I created as a Company Contribution. There is no tax implication on this entry, other than that you have to add the PST value to non-cash taxable benefits. As long as the total includes the PST amount and you have a record somewhere (I keep spreadsheets to track my Tool Allowances) that you added it to the value of the item, you're good. You don't have to record as having 'collected' this amount of tax from the employee because you really aren't. You are simply adding the total cost of your item (which is the item + the PST) to the employee's salary, for an expense you incurred which is showing up somewhere in your G/L.
Hello @threebears ,
This would not be exactly the same, as a SUB would be paid to the employee in cash, so it is a cash benefit, which is basically just another payroll expense for you, posted to taxable wages. If you want to pull reports on just those amounts, you can do so by filtering reports for the item you create to pay this. (Maybe it could be called SUB . . . ?) If you really want to see it broken out on you G/L as an account, then you would have to create another payroll expense account in your COA and name it appropriately.
Hello @daradesire ,
Since we were discussing two different types of benefits above, I'm not sure what "this" in your question refers to. Can you provide a bit more detail as to what you're asking?
Hi @daradesire ,
I'm not sure what you are referring to. As explained in my posts above, most taxable benefits are simply expenses which your company has already paid for through your billing/accounts payable. So the only bank entries are when you pay those bills to your vendors. The entries on the pay cheque are set up through payroll items, connected to G/L accounts as diagrammed above. When using that item on the pay cheque, it creates both entries, in and out (for a value of $0). But the employee only sees that item on his/her pay cheque and tax has been calculated on that item.
Any entries necessary are being made in the background depending upon how you set it up. You don't have to journalize anything more that what has already been done. If you could tell me exactly what type of benefit you are dealing with and how you are handling it now, I would be in a better position to help you. In the meantime, if you follow through those posts above where I give detailed instructions on how to set up a Company Contribution payroll item, it should explain things a little better than I just have. If you are on QBO, the principal is the same, just done through their very limited payroll set-up.
Thank you for responding! I had taken over the bookkeeping for a company from a man (86 years old) who was teaching me, but who has now passed away, unfortunately. He wasn’t keeping track of the Employee Benefits that should’ve been in box 40 of the T4’s. The payment to the health insurance company is done through auto-withdrawal, therefore I was taught to do a General Journal entry, but it only CR the bank and DR Employee Benefits Expense account. I am working with a new accountant now and she isn’t fluent in Quickbooks. We set up the payroll item for the benefits to show up in the paycheque details and I just add the taxable amount to each employee on their first paycheque of the month. Should I not use the G/J for the payment and use the CHEQUE form?