Correct Payroll Item - Medical Insurance for Owners but Not Employees

susanm · ‎November 15, 2017

I am looking for the correct payroll item to use for an S-Corporation paying medical insurance for owners but not for employees. I want it added to all wages, not just Box 1 wages, but also to show up in Box 14. The tax tracking code "SCorp Pd Med Premiums will add to Box 1, but I don't see anything to add it everywhere, yet not increase net pay and still show in Box 14.

qbteachmt · ‎November 16, 2017

"Note that the liability/expenses that are suggested by QB in the item set up may be incorrect"

Here is why:

The Payroll Item(s) flow data to account(s). The Typical set up is that you will Accrue the amount (your expense held as Liaiblity) until you pay the health provider. It doesn't increase the Paycheck at all.

If you are Not paying the health provider through Pay Liabilities, never set up the Payroll Item to link to a Liability account in the first place. This "company contribution" type item is the same as an Addtion + a Deduction = it does both at the same time. As long as you keep this in mind, you know what you are creating is "debit this and credit that."

So, for instance, you Paid the health insurance all year and now you realize that needs to show on the W2. You set up that payroll item linking Both the Expense account link and the Liaiblity account link to the Same Expense account that you already paid out for the health insurance expense. You are creating an immeditae wash. When you run a detail report on that expense account, you would see, for instance:

$1,000 a month for 12 months that you paid as regular checks or bills, for this employee name.

$12,000 In and Out, because you put $12,000 on the Payroll Item on their paycheck (net = 0).

For these Company Contribution items, things get sticky when it is Subject to taxes. You cannot put only that one value on a paycheck and let taxes compute, if there is nothing upon which that tax can be withheld = deducted from a net. So, you might need to Lend them the tax amount as an Employee Advance to be repaid later. This often happens at year end, when people find out too late they completely overlooked something subject to tax and having mandated reporting.

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vivianethompson · ‎November 15, 2017

Do you do payroll in QBO or desktop?

If desktop, the item is pretty easy to set up.

If QBO, in the past I have had to call Intuit and have them set it up for me. I do not know if they have fixed the problem since last time I dealt with this.

I can give you additional information once you tell me which platform you use.

susanm · ‎November 15, 2017

If you could tell me what should be done in Desktop that would be great. Thanks!

vivianethompson · ‎November 16, 2017

Check this article:

https://community.intuit.com/articles/1436944-how-to-set-up-s-corporation-medical-payroll-items

After I set up the item, I run a payroll for the owner with some amount for medical as a test. Then I run a W2 for the current year (you will get error messages, just ignore them) to make sure I get the right results in the W2. If yes, I delete the test paycheck and go forward. If no, I delete the test paycheck and go back to the items and fix them (including deleting them and starting over). Note that the liability/expenses that are suggested by QB in the item set up may be incorrect. That has to do with the P&L and nothing to do with the W2.

qbteachmt · ‎November 16, 2017

"Note that the liability/expenses that are suggested by QB in the item set up may be incorrect"

Here is why:

The Payroll Item(s) flow data to account(s). The Typical set up is that you will Accrue the amount (your expense held as Liaiblity) until you pay the health provider. It doesn't increase the Paycheck at all.

If you are Not paying the health provider through Pay Liabilities, never set up the Payroll Item to link to a Liability account in the first place. This "company contribution" type item is the same as an Addtion + a Deduction = it does both at the same time. As long as you keep this in mind, you know what you are creating is "debit this and credit that."

So, for instance, you Paid the health insurance all year and now you realize that needs to show on the W2. You set up that payroll item linking Both the Expense account link and the Liaiblity account link to the Same Expense account that you already paid out for the health insurance expense. You are creating an immeditae wash. When you run a detail report on that expense account, you would see, for instance:

$1,000 a month for 12 months that you paid as regular checks or bills, for this employee name.

$12,000 In and Out, because you put $12,000 on the Payroll Item on their paycheck (net = 0).

For these Company Contribution items, things get sticky when it is Subject to taxes. You cannot put only that one value on a paycheck and let taxes compute, if there is nothing upon which that tax can be withheld = deducted from a net. So, you might need to Lend them the tax amount as an Employee Advance to be repaid later. This often happens at year end, when people find out too late they completely overlooked something subject to tax and having mandated reporting.

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Correct Payroll Item - Medical Insurance for Owners but Not Employees