Adding Paid Sick Leave for the Coronavirus to a paycheck

The trouble ends here, NicoleN,

With the instructions below, you and your clients can be prepared for the payroll changes resulting from COVID-19 and make the most of these challenging times. Follow these steps:

1. Go to Employees menu, then Manage Payroll Items, then select New Payroll Item.

2. Select Custom Setup, then select Next. 

3. Select Addition, then select Next.
4. Give your pay type a name, such as National Paid Leave FMLA, in the text field and select Next.
5. Select COVID-19 Expenses (or whatever you named the expense account) as the expense account, and then Next. 
6. In the Tax Tracking type window, Select National Paid Leave FMLA, then Next.
7. In the Taxes window, select Next.
8. In the Calculate Based on Quantity window, select Neither, and then select Next.
9. In the Default Rate and Limit window, make sure the rate is at 0 and the limit is at $10,000, select One Time Limit from the Limit Type drop-down, and select Finish. 

Once you've finished these steps you'll be able to add paid sick leave to an employees paycheck. If you need help with anything else, I'd suggest checking out, How to track paid leave and sick time for the Coronavirus. It's a helpful link with a lot of detail. 

If you have any other questions for me. I'm just a click away. 

In 6 above verify before hitting next that all federal state and local taxes are selected EXCEPT employer share of SS. As far as I can tell and backed up by the IRS current FAQ on the subject the only tax exemption is for employer share of ss.

You are correct - but Quickbooks will only allow me to select, or de-select BOTH social security taxes, or neither.  So I can't deselect only the employer portion, although that's what SHOULD happen. 

Thanks for the response, @secorpaint.

During this time, running your business can be confusing with how you should set up your Payroll. Rest assured, changes are coming daily to QuickBooks Payroll products. Thank you for your patience as we work to support you. Our Payroll Teams here at Intuit are working quickly to create appropriate Pay Types, that way you can track and report hours towards this Tax Credit for your business. 

We will let you know once an update about the Tax Tracking type is available. I'm also attaching these helpful articles for additional reference:

• COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs
• How to track paid leave and sick time for the coronavirus

Wishing you and your company health and safety. Have a beautiful day.

Not sure if this was right (I had the same question) but I left the ER selected (as you noted, it will either select or deselect both ER and EE and if you manually adjust in the employee check it will try to catch it up on the next payroll).  Then I ran the payroll. Before running the payroll I edited the employees file to add the National Paid Leave EE to the employee payroll info tab (in the additions, deductions and company contributions section). Then when I started my schedule payroll I edited the applicable employees to input their hours and rate to calculate a paycheck (the National Paid Leave EE shows up on the check once you add it to the employee profile).  Using the steps in the below link I created the tax check, including the ER SS as part of the credit.  

https://quickbooks.intuit.com/learn-support/en-us/help-articles/how-to-claim-my-tax-credits-under-th...

I haven't seen how this is going to flow to the 941 yet.  The result was I have the total gross wages for the Sick Leave sitting on the P&L - COVID-19 Expense.  The COVID-19 liabilities (no health insurance was applicable for this pay) equaled the amount entered in the National Paid Leave Credit pay item (see below) and Fica,Med & Federal Tax payable netted to zero.  The tax payment was equal to the total calculated (inclusive of the ER portion of SS that should not be calculated on these wages) less the total gross wages less ER SS, less ER Med tax.  The total liability check was reduced by these amounts and the National Paid leave Credit pay item was entered as a negative of the total. So technically I don't get a credit for the ER SS but it was in the calculated total so this process corrected the amount to be remitted and cleared out the Fica, Med & Federal Tax Payable account.  I just need to see how that shows up on the 941 and what happens to clear this liability from the books now?

Hello there, overtaxed72.

I appreciate for providing enough details of your concern. I'm here to help and provide clarification. 

Based on the tax tracking, whatever is the tax tracking set for the item will affect the 941 forms. On the other hand, paying the liability will reduce it.
 

Visit the Community again if you need anything else. Keep safe!

@overtaxed72 

The total tax due is equal to your regular full (employer+employee) wage liability plus the covid-19 wage liability. The credit is equal to the gross covid-19 wage.

Here is an example, not to scale. You may not have half the workforce on sick pay or you might have 100% on it, although you need current cash flow to cut checks and within days/weeks, however long it takes to get the refund.  I left out any deductions for health, retirement, state and local because net is whatever it is: Let's assume for this calculation that you pay bi-weekly, thus achieving the max 80 hours over two weeks in a single pay period. And none of the sick pay is for any time off prior to April 1. And, of course, none of it appears anywhere on a Q1 941. YOu have 3.5 months to worry about how it flows to the 941

Covid-19 sick pay gross wages = $10,000 with $1,0000 FWT SS (total ) = $310 and Med = $145

Regular wages = $10,000 with $1,000 FWT, SS= $620 and Med $145

Total tax due + 1000+310+145+1000+620+145 = $3220, tax credit = $10,145 (gross wage plus employer Medicare). What this means you owe nothing now plus you have a credit balance of $6925 to either use next pay period or file a form for a refund. You would have until December to use up the credit.

Caution, as this is still being sorted out, you cannot use PPP loan or EIDL loan to pay the sick pay, you have to have another source of funding, provable, I suppose, by bank statement.

Hi John,

Thank you for your reply.  Can we take this a step further - basically what I wanted to do was clarify how it was showing up in QB with the new payroll items.  So I have two employees on the sick leave after 4/1 - weekly payroll, no health insurance involved.  When I ran the payroll, this is the result in QB.

1.) their combined gross wages reflects in the COVID-19 expense account that was set up per the instructions.  

2.) The ER SS and ER Medicare calculated on the check and went to the normal expense accounts that their payroll goes to (which it shouldn't be there, the ER SS shouldn't be at all).

3.) the liability check initially has both ER and EE SS tax in it as the payroll item will not allow you to turn off the ER portion, if you do, it automatically turns off the EE as well.  So the payroll had to be run with it calculating both ER and EE SS even though the Act excludes these wages from ER SS tax.  You can't manually edit out of the paycheck either or QB will try to catch it up later.  So in issuing the liability check, since it has the full SS tax calculated in the number I used the COVID-19 Credit pay item to reduce the liability check to the amount it should be (so because of the limitation described on turning off the ER SS tax, the liability check is reduced by the Gross Sick Pay wages and applicable ER Medicare tax on these wages using a negative National Paid Leave Credit payroll item and using the expense tab to enter a negative for the ER SS on these wages because it shouldn't be in this number to begin with and this removes it from the expense account).  In doing so, it does clear out the Federal Withholding, Fica tax payable account (one account combined), the medicare payable account and the liability in the Payroll Center.  However - the COVID 19 liability account that was set up in the instructions (which I tied to the National Paid Leave Credit pay item) now has the total gross wages + the ER medicare tax on these wages. 

3.) So how does this payable get cleared off?  On the liability check, expense tab I also moved the applicable ER medicare tax to the COVID 19 expense account. That would make the COVID 19 Liability account and the COVID 19 Expense account equal (Gross Sick Wages and applicable ER Medicare Tax).  I'm not clear how the COVID 19 Liability account then gets cleared from the balance sheet.

4.) Yes, I agree I have several months to see how it flows to the 941 however from my perspective I would like to know now to ensure everything if flowing as it should and I have everything set up properly with these two checks then to have to go back and correct potentially 3 months of checks if there is more qualifying sick leave.

5.) Yes, thank you, I am aware that these wages are excluded from PPP of EIDL forgiveness since they are paid under the CARES Act. 

Quick question

Did you. When setting up the payroll item. Unchecked the ER SS? You must manually do so since QB presents you with the default all checked based not on the act but on default for pay type addition 

Go back and edit the tax status of the payroll item you created to track the leave pay

Yes, but as I said, if you uncheck the ER SS it also automatically unchecks the EE SS.  so its either both or neither

I see that, and it is going to make a mess of the 941 no matter which way we go. You could uncheck both (since you only get to do both or none) and figure on leaving the unpaid EE SS obligation unpaid from credits and catch it up on the 941 - there is not supposed to be any penalty.  Or you can run it as is and have the negative liability (credit) sitting around and manually adjust the liability.  It is crystal clear (at least as of this posting date) that these leave wages are NOT subject to employer SS. "The Eligible Employer is not subject to the employer portion of social security tax imposed on those wages.  (Eligible Employers subject to the Railroad Retirement Tax Act are not subject to either social security tax or Medicare tax on the qualified family leave wages; accordingly, they do not get a credit for Medicare tax.)"

Even if you declined to take the credit in order to help out the government in some small way ( taking the credit is not mandatory) you are still not subject to EE-SS and so this is something the QB engineers have to change - unless they have inside information that what we believe today will get changed tomorrow.

HEY @SarahannC and @Ashley H can you have someone please review the law and the portion from the official IRS FAQ I have enclosed and get this made right so that we can unselect only the employer SS? Or at least explain how we are to claim exemption and to remove the liability from our accounts?

personal editorial comment: (it would be far far simpler to A. have laid everyone off on 3/31 or to retain everyone and use the PPP loan for the next 8 weeks and then furlough everyone)

Has anyone heard from QuickBooks as to the solution as of yet? 

This is crazy.  The last thing we need to do is to have to fix everything after the fact.

Thanks!

Good morning, @barbhunt07. 

Thanks for joining this thread. I'd be glad to provide information about updates in QuickBooks Desktop products. 

At this time, changes are coming daily to QuickBooks payroll products. Thank you for your patience as we work to support you. 

The Families First Coronavirus Response Act went into effect with leave taken April 1, 2020, and after. Our payroll teams here at Intuit are working quickly to be able to un-check the Social Security so that you can report the appropriate pay types. 

Per the Act, if an employee was impacted and took time off for COVID-19 related issues before April 1, 2020, the time would be tracked as regular sick hours and is not eligible for any tax credits. 

We will let you know once an update is available. I'm attaching these helpful articles for additional reference:

• What you need to know about the Families First Coronavirus Response Act
• Small Business Relief Initiative

Feel free to comment below if you have any more questions or concerns. Have a safe and productive rest of your day!

When setting up Payroll item National Paid Leave EE, I have followed the Intuit Quickbooks instructions, but on the TAXES tab, what should/should not be checkmarked?  It is checkmarking everything except CARES Co Soc Sec Deferral, CARES Retention Credit & National Paid Leave Credit - all not marked.  Is that correct?

Step by step setup is great except that one question.  Can you do a step by step for running payroll?

Hi TW9. 

I understand how difficult times like this can be, with new information releasing so quickly, however, you came to the right place for answers. As per the instructional article below, if you've set everything up correctly and made sure your product is up-to-date, you should be able to run payroll normally. 

Once you've set up your payroll to handle paid leave under the FFCRA, you can run a regular payroll. When you do run payroll, make sure you add the appropriate payroll items for the paid leave, and track those hours that have limits, and pay out your salaried employees by the hour. 

- How to track paid leave and sick time for the coronavirus

This article highlights aforementioned setup process as well as how to run payroll.  

- Update QuickBooks Desktop to the latest release

This article highlights how to check if you have the most current version of Desktop and how to manually update it if you need too. 

Follow these steps if you want to make sure you're up to date:

• Open QuickBooks Desktop.
• Press F2 (or Ctrl+1) to open the Product Information window.
• Check your current version and release.

If you determine you need to update your product follow these steps:

• Close your company files and QuickBooks.
• Open the Windows Start menu.
• Search for QuickBooks Desktop. Right-click the icon and select Run as administrator.
• While on the No Company Open screen, go to the Help menu and select Update QuickBooks Desktop.
• Go to the Options tab. Select Mark All and then select Save.
• Go to the Update Now tab and select the Reset Update checkbox.
• When you're ready, select Get Updates.

When the update finishes, close and reopen QuickBooks Desktop. To install the updates, select Yes.

When the install finishes, restart your computer.

Once you've successfully put in the paid leave and sick time, and made sure your product was up to date., you can run payroll like normal. 

Thank you for your patience, If you have any other questions or concerns, feel free to post them here.

Nick M, Do I understand your previous reply correctly that if you are having to pay sick leave to a salaried employee you pay them as hourly instead of salary for the portion not covered under the sick leave? 

Hey, ASteele_70.

That is correct. Based off of How to Track Paid Leave and Sick Time for the Coronoavirus, this applies to many of your current employees.  You can use the above article as a guide and reference to tracking your employees during this time. If you have any questions please let me know.

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@ASteele_710 wrote:

Nick M, Do I understand your previous reply correctly that if you are having to pay sick leave to a salaried employee you pay them as hourly instead of salary for the portion not covered under the sick leave? 

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The 2/3 pay applicable leave is 2/3 of normal rate over a 40 hour week. Not regular rate over 2/3 of 40 hours. The entire 40 hours is used. For a salaried position, one could reduce their salary by 1/3 for the period(s) instead of x time y but the max per day still has to be adhered to.

Nothing prevents you from topping up any employee's 2/3 pay to their full level, you just have to use other funds that are not able to be credited

When I set this up as described QuickBooks is not calculating the SIMPLE on this.  Is anyone else having this issue?

Thanks for dropping by the Community, @Vickie31. I'd love to help you with your issue.

For me to provide with the resolution, could you tell me more details about the SIMPLE which is not calculating specifically?

I can answer some general questions or concerns you may have about QuickBooks. Just tap the Reply button below.

If you need some assistance with managing your account, you can visit our Community Help Articles hub.

Post again here if you have additional concerns. I'll be looking forward to hearing back from you. I'll do whatever it takes to ensure your concerns are addressed.

I followed the QuickBooks instructions to set up the Families First Coronavirus Response Act sick pay.  When I do my payroll the employee and employer portions of the SIMPLE contributions are not being calculated on the sick pay amount.

Thanks for the additional information, Vickie31. It sounds like you're referring to Simple 401(k) and/or Simple IRA 408(p) contributions.
 

Since you've followed our steps for tracking sick time, but the information isn't calculating correctly when doing payroll, I'd recommend contacting our Customer Care Team. They'll be able to help look over your account in a secure environment and create an investigation ticket if necessary. I've confirmed that presently there aren't any ongoing or solved investigations about this.
 

Here's how to get in touch with them:
1. In the top menu bar, go to Help, then QuickBooks Desktop Help.
2. Select Contact Us.
3. Enter a brief description of your issue in the Ask a question (or tell us what's wrong) field.
4. Click Continue.
5. You'll be provided with a few options. To get in touch with the right team, choose chat or phone support.
 

Also be sure to review our support hours for when representatives will be available.
 

I've included a few payroll-related resources which may come in handy moving forward:

• Deductions & contributions
• Add or edit a deduction or contribution
• Help on common payroll topics 

I'll be here to assist if there's any questions. Have a wonderful day!

The IRS FAQ on Covid Credits says that it's the Employers share of Medicare that is credited, not SS

I was wondering if Vickie31 was able to resolve the issue with Quickbooks not recognizing the sick leave wages as compensation and therefore not computing the Simple IRA payroll deductions correctly? I have had the same problem and have not figured out how to "force" recognition of those wages as there was not that option during the set up instructions. Right now all of the Simple IRA payroll deductions are being calculated on the employees gross wages net of the leave wages - which is incorrect - any help/guidance would be greatly appreciated.

Chris67