Fringe Benefits and Liabilities

I appreciate your diligence in navigating the complexities of fringe benefits and liabilities in QuickBooks Online Payroll, CM114. Let me assist you in finding the support for your business.

I recommend contacting your accountant to effectively manage the liability account and ensure compliance with tax regulations. They can offer tailored advice and support in managing these adjustments effectively.

If you don't have an accountant yet, consider utilizing the QuickBooks Certified ProAdvisor website to assist you in finding a qualified professional.

Here’s how to connect with a ProAdvisor:

1. Visit the QuickBooks Certified ProAdvisor website.
2. Click on the Find an Accountant tab.
3. Complete the necessary details such as Location, Services provided, Industry served, and Product supported.
4. Browse through the profiles of certified accountants and message the one that best fits your needs.

Additionally, I'll share this article to check your employees' year-to-date totals and payroll liabilities: Run payroll reports.

The Community team and I encourage you to revisit this thread if you have any further questions or require assistance with fringe benefits or other QuickBooks features. We're always happy to help.

@CM114 

Use the same expense account for both the expense account and the liability account on the company contribution payroll item.  You don't want your expense to increase (you already incurred that expense) or the liability account to increase when added to the employee's paycheck.  Assigning the same account to both the expense and liability account on the payroll item will offset the two entries.       

@CM114 

Do not make a journal entry as suggested by @Aldren18.  It's unnecessary and should be avoided. 

Thank you for your suggestion.  I've tried several journal entry combinations.  The problem is, since the payroll item automatically adds the fringe benefit amount to both the debit and credit sides, I've not found a way to eliminate it by use of journal entries.  If I'm misunderstanding something, please let me know.  

Thank you for your input...  When I used the same liability and expense account in the fringe benefit payroll item, it did eliminate the liability on the balance sheet.  However, I do need the fringe benefit to be added as a payroll expense for the person who received the benefit, so it will increase their total compensation by the fringe benefit amount and will reflect what must be reported on their W-2.  By canceling each other out, that payroll expense, of course, disappears.

I experimented with putting different payroll account numbers in the exp & liab fields in the payroll item and then moving them to the correct accounts with a journal entry, but that didn't work either. It either leaves an excess or a shortage by the amount of the fringe benefit on the debit or credit side.  No matter what I've tried so far, that's what happens.

If you have any other suggestions, I would sure appreciate it.

The problem is, I need to increase the debit side (payroll expense) but I don't know of anything I can put on the credit side that will neither affect the balance sheet or the profit & loss statement.  And I don't know of a way to only add something on the debit side and nothing on the credit side.

Like you pointed out, the original expense to the company (which became the fringe benefit to the two employees) was previously accounted for with the expenses on the debit side and cash (credit card/bank account) on the credit side.  But since the employees must report that fringe benefit on their taxes, I must increase their total compensation by that much, which would increase the debit side.  But there's nothing on the credit side to balance it out.  The default account for the Company Contribution payroll item is a liability account, but that's the problem; I then can't eliminate the liability from perpetually being on the balance sheet. 

I just saw your reply.  I do appreciate the time you're spending on this to assist me.  I can't take time right now to think a lot about what you wrote, but I will later.  I also read the post you referenced, and I will revisit it too.

The one question I have at this point is, if I use the same acct numbers in the exp and liab fields so they cancel each other out, the fringe benefit amount will appear, as it should, on the employees' paystubs, but it's not reflected in the total compensation for the employees on the P&L statement.  Are you saying that's okay and I should simply add the amount of the fringe benefit to their W-2s, but the W-2s will not agree with the P&L?  It seems odd that QB can't handle a situation properly and you have to manually work around it.

Along with this--if I understand it correctly--the whole purpose of the Company Contribution (vs. the Addition) type of payroll item is to add compensation without increasing net pay for an employee.  That's so the additional compensation will appear both on their paystub as a fringe benefit and increase their total compensation on the P&L report (by use of the expense account defined in the payroll item) so it will match the W-2s.  And, of course, it also normally adds an equal liab to the bal sheet--which is the original problem I had. If you must "cheat" the system, so to speak, by setting the exp and liab accounts the same, is QB designed incorrectly?

I'm not expecting you to answer all this, but these are the questions that are hanging me up at this point.  I'll look into it later.

Thanks again...

I may have answered my own questions.

Last year, I didn't renew my subscription to QB Enhanced Payroll (because our state's revised tax tables weren't updated in QB for several months after the fact) and I changed to doing payroll manually in QB.  Since I do manual payroll, I am unable to generate W-2s within QB.  If I were able to do so, however, I anticipate the fringe benefit amounts would be included in total compensation on the W-2s, even though they don't appear on the P&L, because they appear on the paystubs of the employees.  So the W-2s would be accurate and so would the P&L report, because the fringe benefit shouldn't be reflected on the P&L as an additional company expense.

Regarding the Company Contribution payroll item normally creating an exp and liab account, that makes sense in cases where the expense (which becomes a non-cash fringe benefit to the employee) has not yet been paid by the company.  Therefore, a liab acct would also need to be created.  In my situation, where the expense to the company had previously been paid, like you said, you wouldn't want another expense (a payroll expense) to be added to the company's books; it should only be added to the employee's W-2 as taxable income.

Regardless, I think I'm set now.  Thank you very much again!