Excess Term Life Insurance on a Paycheck

Hello there, @Silverado4. 

When we read a post, we have to identify if it's really a bug or just an unexpected behavior that we can fix here. Or, is there a workaround to make sure a poster is able to work with his books? Then, if we can't do something about it anymore, that's the time we request for a call.

We encourage posters to call, so our phone agents can get additional details of the issue. They need to have screenshots, replicate the scenario on the QuickBooks company of the poster, get the account information of the affected user, quantify the affected users, etc. This way, our engineers will have enough information to find the root cause and carefully create solutions that will not affect other functions. Also, there are things that can't be done here for security reasons. This why we request for a call.

On the other hand, I like the idea of not explaining the scenario again when reaching out to our phone support. I'm sharing this to the management team. 

You can check out this page that will walk you through applying S Corp Medical at year-end for corporate officers. 

Keep me posted if there's anything else that you need help with. Take care and have a great day!

I tried to enter all the taxable portion of group term life insurance so that it would be a taxable item on employee paychecks, but instead, Quickbooks added the amount to salary expense and created a liability! This is incorrect; this is supposed to be a memo only entry on the paycheck in order to have the taxability of the excess over $50k life insurance taxed to the employee as a fringe benefit.  It should have zero impact to the company P&L and zero impact to the company balance sheet. 

Every payroll system I have ever used adds this as a taxable item on the paycheck with no impact to the company P&L or balance sheet.  It is just a taxable fringe benefit; nothing more. QB please get this fixed!

I appreciate you for reaching out to us, @lsefcik.

In QuickBooks, the taxability of group term life insurance (GTLI) depends on the specific circumstances of the policy. 

GTLI is generally taxable to employees if you pay for coverage and the face value of the policy exceeds a certain amount. The amount at which GTLI becomes taxable varies depending on the policy's issuance year. In 2021, for example, the face value of GTLI must exceed $50,000 for the premiums to be taxable to the employee.

You may want to check what tracking type you're currently using. You can also make changes if necessary, and I recommend consulting with your accountant to ensure your records are in tip-top shape. 

You can visit this article to know how to create a payroll summary report to see what you've paid out in your QuickBooks payroll: Create a payroll summary report in QuickBooks.

The Community always welcomes you for further inquiries with regard to the opening balance and transactions. Have a great day ahead!

You have given me the tax laws regarding GTLI and asked me to consult my CPA.  I am a 40 yr CPA and I know and understand the tax laws regarding GTLI and the taxability of the excess over $50k.  The reason I am posting this question is because in 2022 when I entered the taxable portion of the GTLI into each employee's "pay type GTLI" thinking I was adding a taxable fringe benefit, which is a paycheck memo entry only to get it taxed to the employee, Quickbooks added this fringe benefit amount into my salary expense (debit) and created a false liability (credit).  They treated it as an additional income item that generated some type of liability.  Adding a taxable fringe benefit to an employee's paycheck should have NO impact to the company's P&L nor should it impact the company's Balance sheet.  I'm trying to find out if this has been corrected by quickbooks payroll and if we enter a fringe benefit, does it actually just tax the employee, with no impact to our GL.

I can see the urgency of getting this resolved, @Isefcik.

I've checked my resources, and there's currently no open investigation about the Group-Term Life Insurance (GTLI) taxable benefit affecting the company's Profit and Loss and Balance Sheet. That said, we're unable to identify if this issue has already been resolved by QuickBooks Desktop (QBDT). However, allow me to redirect you to the best support available so we can further investigate this.

You can reach out to our customer support team by arranging a callback or through chat. You may also request a screen-sharing session with them in a secure setting to identify the cause of your issue. This way, they'll be able to walk you through the troubleshooting steps better. Here's how:

1. On your QBDT, go to Help and click QuickBooks Desktop Help/Contact Us.
2. Select Contact Us.
3. Provide a short overview of your issue and click Continue.
4. If prompted to sign in, click Continue and then Continue with my account. Enter your Intuit login credentials.
5. You'll receive a single-use code. Enter that code and select Continue. If you have more than one account, select the account you want to use and click Continue.
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Please note that QBDT Payroll Basic, Enhanced or Standard supports are available Monday to Friday from 6 AM to 6 PM PT, while QBDT Assisted Payroll is open 24 hours daily.

If you wish to learn how you can wrap up this year's payroll and prepare for the new one, please see this article: Year-end guide for QuickBooks Desktop. It contains all the preparations needed in preparing your tax forms to get a head start on payroll.

Attending to your concerns is our main priority here in the Community, so please don't hesitate to ask us more questions about payroll taxes by leaving a reply below. Take care and have a good one.

Hi Isefcik were you able to resolve this issue? I am having the same issue with GTL impacting my P&L. It doesn't appear the QB is handling GTL appropriately...

No, I have never resolved it and so I just stopped adding in the taxable benefit.  It is absolutely ludicrous that a "national payroll provider" cannot figure out how to add a taxable benefit to an employee's paycheck with absolutely NO impact to the company's P&L or Balance sheet.  When I added the taxable life insurance in they recorded it as excess wages, increased my salary expenses and set up a liability as if I owed this amount of benefit to someone!!! It took me months to unwind it.  I don't understand who is running the payroll division at Intuit Quickbooks; it cannot be a CPA nor anyone that understands payroll and taxable benefits. 

Their answer to me was to just journalize out the excess wages (which were posted by them incorrectly) and the liability (which wasn't real and also posted by them incorrectly), but then all the wage reports you pull are incorrect for the entire year.

I sincerely hope someone with some kind of authority is monitoring this post and I am happy to talk with anyone at QB who wants to understand what should be done to add in a taxable benefit on an employee's paycheck.  All the other payroll companies I've worked with over the past 40 years have been able to do this without a problem.  It is sad.

JaeAnnC,

I'm not sure why there is not a case; I reported this problem repeatedly while it was occuring and also posted it as a problem within the quickbooks "report a problem section".  I'm sure as a software company you have a testing sandbox where it would be a simple process to enter in a taxable benefit to a test employee and you can see for yourself what happens.  What happens is exactly as I described it: you create an additional Salary expense on the P&L and create a liability for the amount of the taxable benefit on the company balance sheet (as if we owe someone the amount of the taxable benefit).  Clearly you do not understand the process for recording taxable benefits on employee paychecks and QB doesn't care enough about doing it correctly to fix the problem.  Unfortunately, you bank on the fact that the majority of QB users are unsophisticated and don't understand how these things should work, but you are incorrect in that assumption.  Any CPA using QB will know immediately that this is being handled improperly by QB and will discontinue trying to add in the taxable benefit, even though it is an IRS requirement to do so!  QB can do better and I refuse to spend one minute more trying to get on a call to explain this to a customer service person who doesn't understand it nor to test it out with my own real live-time information and do screen shares.  QB should be doing the testing on this and should fix it! It isn't that hard. ADP, Paychex and all other payroll systems know how to do a taxable benefit properly (tax the employee, has nothing to do with the company).

I am still having the problem of putting Group Term Life Insurance on a employee paycheck with out it affecting my P & L  has this been resolved?

IRC section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. There are no tax consequences if the total amount of such policies does not exceed $50,000. The imputed cost of coverage in excess of $50,000 must be included in income, using the IRS Premium Table, and is subject to social security and Medicare taxes.

How do I get this to report correctly??

Thanks for joining this thread, Debbie2023. I appreciate your detailed information.

There's 2 tax tracking types you can use when setting up Group-Term Life Insurance (GTLI):
 

• None is used for nontaxable portions of the premium which pays the first $50,000 of GTLI for any employee.
• Taxable Grp Trm Life is utilized for your taxable portion of the premium which pays your excess over $50,000 of FTLI for an employee.

To properly identify which tracking type you should be using, and what other changes may need to be made to get what you want to display on a particular report, I'd recommend working with an accounting professional. If you're in need of one there's an awesome tool on our website called Find a ProAdvisor. All ProAdvisors listed there are QuickBooks-certified and able to provide helpful insights for driving your business's success.

Here's how it works:

1. Go to our Find a ProAdvisor page.
2. Use the City or ZIP search field to specify a location.
3. Select Find a ProAdvisor.
4. Browse through your results and find one that works best for the business. You can click on each ProAdvisor's profile to learn more information about them.
   
   

Once you've found an accountant, they can be contacted through their Send a message form:
 

1. Use the available text box to introduce yourself. Be sure to include details about which services you're looking for.
2. Enter your appropriate info in the Your name, Your email, and Your phone number (optional) fields.
3. Select Send message.

I've also included a detailed resource about setting up and reporting GTLI which may come in handy moving forward: Set up & report GTLI

If there's any additional questions, I'm just a post away. Have an awesome Wednesday!

Once again QB Moderator Zack E, you are missing the point!!! 

We all understand the law and the rules!!! QB is not handling this properly!!! If you enter the taxable amount (which is the amount over $50k provided by the company and is a set amount based on an IRS table), QB taxes the employee but then they ALSO add it to the P&L as excess Wages (WRONG) and sets up a liability (WRONG)!!! Why can't anyone at QB get this, understand why it is being handled incorrectly and fix it.

The taxable portion to the employee is a paycheck memo item only! It should have zero impact on the company's balance sheet or P&L. 

Read the problem, understand the problem, FIX the problem.  Every payroll service in America can handle this correctly, except for QB!

I found 2 workarounds. Either 1) create a journal entry to move the payroll liability to the wage account or 2) change the payroll mapping account for the GTL to the same wage account the wages are mapped to.  Initially you couldn't map GTL to an expense account but they have changed it so you now can. In both cases, this will cancel each other out and not result in additional wages in P&L. It's clunky but it balances out.

This appears to have fixed the issue as far as I can tell for now. You're a freaking angel. Thank you. This was 8 hours of my life and soul being sucked away today to finally find the answer. Now I can go home in peace!

Does QuickBooks assist with calculating the value of excess insurance, or do we need to manually calculate it based on IRS rates, assign it to each employee, and track their age with every payroll run...?

Does QuickBooks assist with calculating the value of excess insurance, or do we need to manually calculate it based on IRS rates, assign it to each employee, and track their age with every payroll run?

I reported this issue over two years ago.  To the best of my knowledge it hasn't been fixed.  The taxable value for the amount of "excess life insurance over $50k" should be able to be added to a paycheck and be taxed; that is all!  It's a memo entry, with absolutely no impact to the company GL.

Your premium is paid separately through AP.  We should be able to use the IRS tables, figure out the taxable amount and divide that evenly over the year on EE paychecks.  Quickbooks cannot handle this properly!!! They hit salary expense for the taxable portion and set up a liability.  I've never seen a payroll company not be able to handle this properly.

Agree. If I create the GTLI payroll item and select either expense or liability account in the payroll item setup, I'll have to "fake" pay it, which will affect the cash account. Any solution without creating a ghost liability? AKA GAAP? 

Could I set up a "non-cash" payroll item as a regular pay, and custom the tax calculation on it? This is getting ridiculous.

Yes, it is ridiculous for QB to not be able to handle a "memo tax entry" for taxable fringes, then tell people to just journalize the wrong stuff out!  Then all your payroll reports are wrong, so good luck explaining that if you ever get audited on payroll and payroll taxes!

QB: just grow up and learn how to be a real payroll provider and tax fringes with "memo" entries which tax the employee and do nothing to hit the company GL