Glad to have you back, @amoskovitz.
Yes, you are correct. The health insurance premium is a company expense and a payroll liability. To track this, all you have to do is to create an account for the insurance premiums. Generally, this is an Other Current Asset account.
Please see the sample snips below for reference:
Once done, you can start entering the payments to the vendor using the account created. After that, make a journal entry to allocate one month or a quarter of the expense.
Before doing so, I recommend reaching out to your accountant to ensure the best course of action for your business.
For complete details of tracking insurance premiums in QBDT, refer to this link: Record and allocate Prepaid Expenses.
I'll be around to help if you have any other concerns. Just let me know by leaving a reply below. Take care!
First, what and amazingly detailed response and you provided such an interesting use of QB that I never thought about doing in the past! But you are right, technically this is a prepayment.
I need to ask a few more questions and share some more details to fully understand how this should be done. In this case, there is a single payment made to the insurance company of 15K. There is also a single paycheck created for the year which is enough to pay the taxes. Often, the check may be for a small amount like $10 after taxes but the 15K of S-Corp Medical premium is now on the paycheck and will appear on the W-2.
Therefore, there is no need to keep the prepayment account and general ledger because it is done all at once and one time.
In the past, Health insurance (always been 100% company paid) has been categorized as account Type, "Expense" as the company did incur the cost and I want it to show on the P&L as an expense to the company. Obviously, in this case zero amount is cover by the officer.
Then, I created an insurance benefit called "S Corp Medical Benefit Co Paid" and Expense account type "Expense" and Liability account type "Payroll Liabilities". I want to show on the P&L that the 15k was a payroll liability but it also was an expense because the company paid 100% for it. I do not want the 15K to show up on the P&L as 2 expenses of 15K.
Have I done this correctly? (Clearly I am not an accountant and you have BEEN AMAZINGLY articulate and so very helpful!)
Any advice and clarification would be so incredibly helpful for me!
You're halfway there, amoskovitz.
When you run payroll, company paid taxes will increase both Expenses and Liability accounts. You'll want to choose the Liability account when paying the insurance benefit, so it won't show up twice on the Profit & Loss report.
Just in case you want to set up a scheduled liability in QuickBooks, refer to this link: Set up and pay scheduled or custom (unscheduled) liabilities.
We're a post away if you need anything moving forward. Have a great day!
Hello there, amoskovitz.
If you've followed ShiellaGraceA's instructions, the amount will show up on the Expense (P&L) and Payroll Liability (Balance Sheet) accounts when using the insurance deduction item on the paycheck.
Payroll liabilities include the money you pay your employees, the withholding you take from their paychecks, and your payroll expenses as an employer. Your portion of the insurance deduction remains a liability until you pay them to the required agency.
Let us know if you have further questions. We'll be around.