Health Insurance Premiums as Payroll Liability

@MavenP  Not sure if you can get it to show up in payroll liabilities, but the screen you would use to schedule payroll liabilities (941, State Withholding, etc), is under the Payroll Center, Pay Liabilities Tab.

At the bottom of the window is a section called Other Activities. In this section, there is a link called 'Change Payment Method'. This is the link you want. It opens the QuickBooks Payroll Setup window, with an option on the left for Schedule Payments. In Schedule Payments, you will find a place to set payment schedules for your payroll liabilities such that they show up under the Pay Liabilities tab.

Regardless, there is a menu you can use to bypass this.

Go to Employees>Payroll Taxes and Liabilities>Create Custom Liability Payments.

This will generate a Select Date Range for Liabilities window.

After you select the date range and click OK, it will open a Pay Liabilities window. This window will display all of the Payroll Liabilities that are still owed for the selected date range. This is how you can create a liability check for the relevant health insurance premiums.

As far as how to get the payment to show up on your P&L as a health insurance expense, this can be done under the Payroll Item List. Once the List is open, right click on the relevant Item and edit it.

For the Company Paid Item, continue to the screen for Agency for Company-paid Liability. The option to select an expense account will be the bottom line on that screen.

For the Employee Paid Item, it's a bit more complicated. While the Company Paid Item is 100% paid by the company, the Employee Paid Item is, well, paid by the employee. It comes directly out of their paycheck, and is not really paid by the company at all; it's simply held out of their paycheck for them and later distributed to the correct agency.

You are already claiming the Employee's gross pay as a Payroll Expense; because of this, if an employee has $300.00 in gross pay, you will claim the full $300.00 as Payroll Expense.

Trying to claim the Employee-Paid Health Insurance as a health insurance expense would be double-dipping; to continue the $300.00 example, if you had $30.00 held out of the Employee's paycheck for health insurance and tried to claim it as health insurance expense, you'd be claiming $300.00 in payroll expense and $30.00 in health insurance expense, or a total of $330.00 in expenses despite there only being $300.00 to start with.

Some goes to the employee (Net Pay), some goes to various governments (Employee-paid payroll taxes), and some goes to the health insurance provider (Employee-paid health insurance), but the total expenses should never exceed the gross pay.

In short, because the normal check you're creating presumably contains both company-paid and employee-paid health insurance, you are likely overstating your expenses.

Hello there, MavenP. Thank you for the detailed information you've provided.

I agree with FishingForAnswer's recommendation to schedule payroll liabilities and generate custom liability payments in QuickBooks. The suggestion to handle this directly through the QuickBooks interface under the Employees menu for customizing liability payments provides a practical approach to address your issue. Please consider following the steps provided.

Concerning correcting the previous transactions, locate the payroll item related to the health insurance transactions that need correction. As you progress on the prompts you will eventually reach a step where you can select the account to which this payroll item is linked. From there, you should choose the proper payroll liabilities account instead of the expense account.

Once you click the "Finish" button after choosing the correct account, ensure to select the option that says "Update all existing transactions to use this new account. This choice ensures that all past transactions, which were recorded under the incorrect account, are automatically updated to reflect under the correct payroll liabilities account. I'll share a screenshot for your reference:

Additionally, I recommend consulting with a professional accountant to ensure these adjustments are made according to accounting standards and that they're reflected correctly in your tax filings and financial reports.

Moreover, you can generate payroll reports. It provides a clear picture of the payroll expenses, which is crucial for any business aiming to maintain a healthy bottom line and ensure employee satisfaction.

The recommendations are aligned with best practices for managing payroll liabilities and expenses in QuickBooks. If you have additional concerns, please add them below, MavenP. I’ll be here to assist.

Hi GlinetteC, and thank you for your response.

When I go to Employees, Payroll Taxes & Liabilities, Create Custom Liability Payments, I can see the "unpaid" health insurance premiums for the time period I have selected.  This Pay Liabilities dialog box will allow me to "pay" these liabilities, but actually they have already been paid, just using an expense account instead of a payroll liability account, that's why they show up as unpaid I believe.  I don't want to double pay them as it seems like this would happen here.  Can I change the account here in this dialog box to a payroll liability, or what am I missing here?  Thanks in advance.

We can correct the way of recording your Health Insurance payments and ensure that it won't double-dip, MavenP. I'd be glad to discuss and help you today. 

Entering historical payroll tax payments outside of the guided Payroll Setup window in QuickBooks is a task many users face, particularly when cleaning up data, correcting past errors, or when they've already completed the initial payroll setup but need to add prior-year data. The Payroll Setup provides a structured interview for entering year-to-date payroll data, including tax payments. You can use this backdoor process to enter historical tax payments for the current or previous years.

Here are the steps: 

1. From the Help menu, choose About QuickBooks.
2. Press Ctrl + Alt + Y or Ctrl + Shift + Y to open the Setup YTD Amounts window.
3. Select Next until you reach the Enter prior payments section.
4. In the Enter Prior Payments window, select Create Payment to enter all prior payroll tax and non-tax payroll liability payments you have made during the current or previous years.
5. Enter the Payment Date and For Period Ending date accordingly (in many cases these dates will be the same).
   
   (Note: If there is already an item with an amount selected under Taxes and Liabilities, select Next Payment. This may be a prior payment that you have already entered.)
6. In the Taxes and Liabilities field, choose the payroll tax item that you've already paid and want to record in QuickBooks Desktop. And enter the amount. You can add a memo to remind you what the payment is for.
   
   • Payments for prior quarters are entered as lump sums, and current quarter payments are entered per payroll.
7. Select the Accounts Affected... button. This displays options for how you want the payment to affect your Chart of Accounts (COA).
   
   • Affect liability accounts but not the bank account: Use this option if your checking account has the correct balance. Selecting this option will cause the prior payment to not show up in the bank register.
8. After you have completed your first payment, continue to the next by selecting Next Payment. Continue this process until you have completed all payments. Then select Done to save your work. Click Finish to close the window.

Moreover, you can check out this valuable article that can give you additional insights on entering the payment scheduled liabilities in QuickBooks Desktop: Pay scheduled liabilities in QuickBooks Desktop. 

Lastly, this article can help you check and fix a liability balance report includes the items assigned to a liability account, deductions and most company contributions: Fix a discrepancy on Payroll Liability Balances report in QuickBooks Desktop Payroll.

Ensuring that the correct payroll liability account is used is essential to prevent discrepancies and avoid overpaying your health insurance. If you need assistance or have further questions related to QuickBooks, please feel free to Reply back. The Community team is ready to help you!