Adjusting Health Insurance (company paid)

Thank you AldrinS!  

Hello AldrinS

I have a dilemma as well.  I hope you can help me.  Here is what happened. 

We pay on the first of the month, for that month.  We have additional liablility deductions that I took out for January, but they should not have been taken out until February's check because of the way the Insurance company bills.  They bill for the insurance AFTER the month. 

So my January's  liability check is for too much.  If I mail the check they will not give me a credit for the amount overpaid.  They want a check for the exact amount.

so I don't know what to do.  do I cut them a check, applying correct amount to 'insurance expense' just to get it right with them?  but what do I do with the liability check?  write it out to company, crediting insurance expense? to offset?  and then there will be a balance left over there?    hope you can help me.  I'm not familiar  with this at all.

I've got you covered, Patti1010.

It would be my pleasure to help you take care of this dilemma and get you on the right track

Thank you for the details that you provided. It's exactly what I need to provide you the best solution. We'll just take things one step at a time to avoid any confusion.

Based on what you've mentioned, we could do a couple of adjustments to transfer the additional deduction from January to February. With this, you won't need to cut them a check, and it'll let you pay January's liability for the exact amount.

That said, let me walk you through the steps on how to make the adjustments:

To remove the extra deduction from January

1. Click the Employees menu.
2. Select Payroll Liabilities, then Adjust Payroll Liabilities.
3. Choose the correct Effective Date.
   - It should be the date of the paycheck when you took out the liability.
4. In the Adjustment is for section, select Employee Adjustment.
5. Click the blank space under the Item Name column. This will bring out the drop-down arrow.
6. From the Item Name drop-down menu, choose the liability payroll item.
7. In the Amount field, enter the appropriate amount. Make sure to enter only the additional deduction as a negative amount.
8. Click the Accounts Affected button, then select Affect liability and expense accounts.
9. Hit OK.

To add the liability to February

1. Click the Employees menu.
2. Select Payroll Liabilities, then Adjust Payroll Liabilities.
3. Choose the Effective Date. Select any date within February.
4. In the Adjustment is for section, select Employee Adjustment.
5. Just like before, enter the payroll item and the amount in the Item Name and Amount fields.
   - This time, you'll need to enter the deduction as a positive amount.
6. Click the Accounts Affected button, then select Affect liability and expense accounts.
7. Hit OK.

I know I've shared this on my first post, but let me include our detailed guide on how to adjust payroll liabilities again, just in case.

Once you're done, let's talk about how to pay the liability. Going back, you mentioned a liability check. To clarify, is this for the month of January? If it is, I recommend we void and recreate it.

I just want to make sure it has the right amount. The steps below will guide you on how to recreate the check:

1. From the Employees menu, choose Pay Taxes and Liabilities, then Pay Scheduled Liabilities.
2. In the Pay Taxes & Other Liabilities section, select the liability for January.
3. Click View/Pay, then Save & Close.
4. In the Payment Summary window, select Print Checks.
5. Click OK.

For more information about this, you can check out this article: Set up and pay scheduled or custom (unscheduled) liabilities

That should do it! You'll be all set with your liabilities after you follow these steps.

You're always in good hands here in the Community. Don't hesitate to reach out to me again should you need more help with this. Thanks for dropping in, cheers to continued success.

All you need to do is Not Pay the Liability in Full.

"If I mail the check they will not give me a credit for the amount overpaid.  They want a check for the exact amount."

On the Liability check, reduce it to the amount you intend to pay, now. The rest will wait in Liabilities, to be paid later.

This isn't quite right:"so I don't know what to do.  do I cut them a check, applying correct amount to 'insurance expense' just to get it right with them?"

It isn't Expense, if you already have it accrued in Liability, and you never Use Write Check. You already ran it into Payroll, and you have to Pay it using Pay Liabilities. It isn't your additional expense. It's Cash Flow, not Expense.

Is there anyway to do this in Quickbooks Online? I spent a good hour on chat today, and they weren't able to adjust it. Seems odd it works in Desktop, but not online?

Any work arounds to reduce a Health Insurance liability without affecting the expense account?

Thank you in advance!

Hello @Kelster,

The company health insurance liability amount depends on how much you've set on the employee's profile.

In addition, here at QuickBooks Online, we don't recommend adjusting any entries or tracked amounts. Instead, I encouraged contacting your accountant and/or tax agency for more assistance.

If you have any other concern, don’t hesitate to comment below.

Thank you for your response. Not helpful, but thanks.

Thanks for the reply, but it doesn't answer my question.....  Is there no way to adjust this? I hopefully have it set up correctly for this year.

Hi there, @Kelster.

I'm here to help you with adjusting health insurance liability in QuickBooks Online.

Currently, the Liability Adjustment tool is only available with the Desktop version. The payroll calculations in QBO are according to the setup process of your employees.

You have two options in reducing the health insurance liability without affecting the expense account:

• You can void the paychecks and recreate them. Make sure to adjust the Health Insurance calculation manually before saving them.
• You can create a Journal Entry.

I also recommend seeking an accountant for an expert's advice to ensure there will be no problem with the books in the future.

Let me know the results, Kelster. I'm still here to help you more if you have additional payroll questions. Wishing you all the best!

How does this adjust the erroneous amount off of the Employee's W2?  This credits it out of the liability account, but how does it credit it from the employee's record?

Thanks for joining this thread, CA337.

Allow me to share some information about how a journal entry and creating a liability adjustment affects the employee’s W-2.

Once you record a journal entry, the adjusting amount will not show/reflect on the corrected W-2. For it to show on the tax form, you’ll have to process a payroll correction for the previous year’s data.

Adjusting payroll information requires account verification. The Community is a public forum, and gathering personal details can’t be done here for security reasons.

I suggest contacting our Payroll Support Team as they have tools to review your paychecks and correct the information. As mentioned by @HoneyLynn_G, create a journal entry to record the corrected amount on your chart of accounts.

As always, I recommend contacting your accountant first to help determine the correct debit and credit accounts.

The most up to date contact information can be found here:

1. Go to Help at the top, then click on the Contact Us link.
2. In the How can we help you with? window enter contact payroll support in the field box.
3. In the Ways we can connect with us section, select Message an Agent or We’ll call you.

The information I provided should correct the employee’s W-2.

If you have additional questions about payroll, leave me a comment. Please know I’m here to assist further.

I have employee health care deductions in payroll liabilities, paid back to the the company (checking). I cannot reconcile these transactions without an actual deposit, which seems really weird. :0 In any case, I cannot reconcile.

We are paying for the healthcare directly to the provider, then deducting a small portion of the additional employee optional coverages out of their payroll checks.

I have been unable to get our CPA to respond to my question, she instead refers us to a Certified QuickBooks expert, who does not respond.

Can you help me?

Kind Regards,

Erica M.

Hello there, Erica M.

Thanks for sharing your concern with us. Let's get this sorted out.

Since there is no actual deposit yet, what you can do for now is to except the transaction from reconciling until the actual deposit shows up on your bank statement.

Here's a great resource that you can check on for more information about reconciliation: Reconcile in QuickBooks Desktop.

For any QuickBooks Desktop concerns, you can reach us through the contact details found in this link: Contact the QuickBooks Desktop Customer Support Team.

Please don't hesitate to let me know if you have further questions while working with reconciliation. I'd be glad to help you out.

I have a similar issue though I didn't see it mentioned exactly.  My company pays the health insurance premium but I forgot to select this for the paycheck I was producing in February.  Therefore, not enough federal tax was withheld.  The paycheck has been cashed.  If I try to take two health insurance (company paid) deductions for March, the federal tax increases exponentially.  I'm sure there's a way to adjust payroll liabilities but I'm not confident in my abilities to do so without assistance.  Is there some guidance you can offer, please?    

Hey there, @CCampbell.

I've got your back with payroll liability adjustments in QuickBooks Desktop. Since this process can a bit tricky you might want to consider contacting your accountant first. I've listed the steps below to help guide you with Employee adjustments:

1. Navigate to the Employees menu, press Payroll Taxes and Liabilities, then Adjust Payroll Liabilities.
2. These tips will help you complete the fields:
   • Use the same date as the last paycheck of the affected quarter. Use today's date if you're working on the current quarter.
   • The Effective Date calculates the amounts on your 940 and 941 forms as well as the Payroll Liability Balances Report.
3. As for the adjustment fields:
   • Select Employee Adjustment if the item you're adjusting is company-paid. It updates the YTD info reported on the employee W-2 form.
   • Choose Company Adjustment if you want the balance to be removed from the Payroll Liability Balances Report.
4. Pick an employee.
5. Complete the Taxes and Liabilities fields by selecting an Item Name and Amount. The Wage Base and Income Subject to Tax are only used when you override a tax amount on a paycheck. You can use the Memo field to make a note about the adjustment for future reference.
6. Push Accounts Affected and hit OK.

That's all there is to it. Now you know how to adjust your employee's liabilities for the health insurance premium. Your accountant can also help you determine what information to put in each field. 

Please don't hesitate to touch base with me here if you need any additional assistance. I look forward to hearing from you again.

That was easy enough to do.  This should also affect the amount of federal tax I owe so can I assume that I need to add that in manually as well based on what I normally pay each month?  Thank you so much for your assistance!    

It's great to see you were able to get the assistance you needed with the help of the Community, CCampbell. Yes, you can manually enter the amount for federal tax each month. I would talk about this with your accountant as well to verify.

You're welcome to comment or post any time you need a hand.

Can you answer this question for the online quickbooks users?   

I accidentally recorded S Corp owners insurance as "Health Insurance (company paid)" on every check for the member this year.  I know how to add the S Corp piece, but I do not know how to adjust the "company paid" amount off of the paystub/W-2.  Can anyone help with this?

I'm here to help keep the process of adjusting company-paid insurance easy and simple, morty3115.

You can follow the steps below to create an adjustment for the said company-paid insurance. Let me walk you through the process.

1. Click Employees at the top menu bar and choose Payroll Taxes and Liabilities.
2. Tap Adjust Payroll Liabilities.
   
3. Enter the Date and Effective Date.
4. Under Adjustment is for, choose Company.
5. Select the Health Insurance item and enter the Amount.
6. Tick Accounts Affected and then OK.
7. Hit OK.
   

I'd suggest consulting an accountant to ensure your books are accurate and not messing up other data. Your accountant can provide more expert advice regarding an accounting perspective.

For more details about this process, check out this article: Adjust payroll liabilities in QuickBooks Desktop. On the same link, you'll find a write-up about how to correct your year-to-date additions and deductions in QuickBooks.

Additionally, if you need help with removing overdue liabilities, you can refer to this article for the detailed steps and instructions: Enter historical tax payments in QuickBooks Desktop Payroll.

Please let me know how it goes by leaving a comment below. If you have more questions about payroll liabilities or need anything else, don’t hesitate to ask. I’ll be here to help. Have a most pleasant day!