I've just made my first quarterly installment for the new Employer Health Tax (EHT) in BC. I had a plan on how I was going to manage the accounting in QuickBooks (desktop Premier), but then started second guessing myself wondering if there is a tax or payroll specific way it should be handled. There is no way for me to know with certainty the total value of the tax until the 2019 calendar year ends, as we are on the threshold of our annual payroll total potentially being between: under the $500,000 exception threshold amount where no tax is due, and $600,000 there the tax will be due on ~ $100,000 over the exemption amount. For this reason, I don't believe the EHT tax is connected to the employees pay statements as either taxable or non-taxable benefits. For this reason, I'm thinking my entries will look as follows.
Installments: Dr Prepaid Employer Health Tax (asset account), Cr Bank account
Tax filing at year end, with example that we have more in the pre-paid asset account than is owed: Dr Employer Health Tax Expense, Cr Prepaid Employer Health Tax
The method of handling the transactions is not connected either to payroll, payroll liabilities, or sales tax, but I think this is the best way. Can anyone provide any feedback to confirm I'm not missing something obvious?
I appreciate the need for the Employer Health Tax to be set up and calculating correctly in QuickBooks Desktop so that you can take care of any necessary remittances. When you're feeling uncertain about which part of accounting something should hit, touching base with an accountant or the CRA is the best option as they'll be able to clarify those details for you. An accountant user here in community may have some insight as well.
Previously, I suggested to another user to set up the EHT as an Other Tax payroll item paid by the company. Check out their question and my response here: Employer Health Tax. Take a look at the steps and see if they're meeting your needs and thresholds as outlined in your question.
To connect with an accountant familiar with QuickBooks Desktop, use our Find a ProAdvisor tool and use your postal code to search for accountants near you.
Feel free to stop by again with more questions!
Thank you for your response, and recommendation to check with an Accountant. I checked with our firm's Accountant to confirm whether the EHT tax is considered a benefit (taxable or not) for the employees. She advised it is not a benefit to the employees, it is a company expense and is to be treated like WorkSafeBC premiums. As such, I'll handle the accounting transactions as I noted in my first question, rather than linking the tax to a Payroll Item.