Hello olga-sabaleuskay,
Great work on considering the best way to pay out a Living Out Allowance to your employees. It's important that you know the best way to record this payout so that it's taxed correctly. I know of a simple way that you'll be able to do this in QuickBooks Online Payroll, so let me show you.
Reimbursements are nontaxable payments to an employee, typically used when an employee needs to be reimbursed for business expenses that were purchased using personal funds. Payouts using this pay type won't appear on payroll tax or other tax reports since they aren't taxable. This pay type is the best fit for what you're looking for, so please follow the steps below to get it set up:
- Hover over the Payroll tab and select Employees.
- Click on the employee you'd like to add this new pay type for.
- Hit Edit employee to make changes.
- Find step 4: How much do you pay?
- Select the Edit pencil next to Additional pay types.
- Under You can also pay: check the box for Reimbursement.
- Choose Add reimbursement type if you'd like to create a new reimbursement pay type with a custom name such as Living Out Allowance. Enter the name into the corresponding field and enter a Recurring amount if necessary.
- Uncheck the original Reimbursement pay type if you've created a new one so that you don't have unnecessary pay types showing when you run payroll.
- Hit Done twice when you've finished.
Now when you Run payroll you'll notice a new column for Reimbursement or your custom name with a corresponding dollar amount field. You won't be able to enter hours here, only an amount, but the amount you enter won't be taxed. This is the best fit for your needs, but reaching out to an accountant might shed some light on other options such as using a taxed paytype and adjusting the taxes after. If you're already working with an accountant, invite them to QuickBooks by navigating to the My Accountant tab. You'll also find the Find a pro to help button on that page where you can browse our database of QuickBooks-certified accountants to find one if necessary.
Since I know having a specific Living Out Allowance paytype or a nontaxable paytype with the option to enter hours instead of a dollar amount would be helpful, I want to invite you to submit feedback on this. By hitting the Gear icon, then selecting Feedback, you can let our product development team know what new features and improvements you'd like to see. While you won't hear back from them, you can rest assured that your voice has been heard.
If you'd like some more information on pay types, check out this article:
Keep in mind that if you have any other questions you can simply reply to this thread and I'll get back to you to provide additional support. I hope you have a fantastic weekend!
