How do I record the employer taxes owed on disability insurance payments made to an employee?

Thanks for becoming part of the Community, vpierson.
 

To allow taxes to be withheld from wages paid to employees, taxable third-party sick pay should be included with a regular paycheck whenever possible. If it's not possible, then an employee advance may be necessary to cover your taxes.
 

Initially, you'll need to create an expense account to track their sick pay.
 

Here's how:

1. In the left navigation bar, go to Accounting, then Chart of Accounts.
2. Click New.
3. Use the Account Type ▼ drop-down list to choose an appropriate type.
4. Utilize your Detail Type ▼ to specify a type that best fits the transactions you're wanting to track.
5. Give your account a name.
6. Add a description.
7. If this is a sub-account of an existing one, tick the Is sub-account option and enter its parent.
8. It's recommended to confirm your account matches its real-life counterpart. Afterwards, choose when you'd like to start tracking finances. In its Balance field, enter the amount in your account and determine its as of date. You can enter the current date if you'd like to begin tracking immediately.
9. Select Save and close.

Next, you'll need to create an additional payroll item, a deduction item, and an employee advance.

If there's any questions, I'm just a post away. Have a wonderful day!

I also have the same problem. We do not pay the  short term disability out, another company does. But we are responsible for the employers share of Medicare and social security tax that was paid out, as well as reporting the income the employee received. How do I account for those taxes to match my 941 without creating extra liabilities?

Let me guide you on recording taxes in QuickBooks Desktop to match your 941 without creating extra liabilities, Ktranspinc.

Before anything else, you'll need to set the disability tax to the employee profile since this is included in their paychecks.

On the other hand, to record the taxes in QuickBooks Desktop, here's how:

1. Enter the payment using the Enter Prior Payments option in the YTD Adjustment window:
2. Select the Help menu. Then, choose About QuickBooks. And press Ctrl+Alt+Y.
3. Choose the date range. Then select Next until you see the Create Payments button.
4. Under Item Name, select the dropdown arrow. Choose the item you need to create a prior payment for.
5. Verify the dates and update as necessary. Select Next Payment to enter another prior payment.
6. Click Done.

The steps I've provided are for recording purposes only. I'd still recommend contacting your accountant for further advice. If you don't have one, you can find a professional through this link: https://quickbooks.intuit.com/find-an-accountant/. 

Furthermore, if you want to look closely at your business's finances, you can run a payroll report. It will provide a detailed summary of your company's payroll expenses, including employee salaries, bonuses, taxes, and other related costs. 

Just click the reply button below if you need further clarification about recording taxes. I'm still here to back you up, Ktranspinc.

I have a similar problem. We do not pay the  short term disability, another company does and this company also pays the social security and Medicare tax. We are responsible for the Federal Unemployment and State (Virginia) Unemployment taxes. How do I account for these taxes?  I am using QuickBooks Desktop.

Thank you

Hi, @Renee87. I can help account for the Federal Unemployment (FUTA) and State Unemployment (SUTA) taxes in your QuickBooks Desktop (QBDT).

Since another company pays for the short-term disability insurance, you only have to record the payments FUTA and SUTA. Before performing the steps below, please confirm that your QBDT Payroll is up-to-date to ensure you have accurate rates and calculations for federal and supported state taxes.

First, you'll need to set up payroll items for FUTA and Virginia SUTA if you haven't created one yet.

1. In your QBDT, go to the Lists menu.
2. Select Payroll Item List.
3. Choose the Payroll Item button, then select New.
4. Select Custom Setup.
   a. For FUTA, select Federal Tax.
   b. For SUTA taxes, choose State Tax, then choose VA state.
5. Follow the on-screen instructions to set up the tax item.

Next, if you're recording taxes for payments that were made in a previous period, please refer to this article for the detailed guide: Enter historical tax payments in Desktop payroll.

Once done, you can then pay the current FUTA and SUTA tax liabilities. Here's how:

1. Go to the Employees menu and select Payroll Tax Liabilities.
2. Select Pay Scheduled Liabilities, then choose the appropriate tax liability from the list. 
3. Click View/Pay to enter the payment details, such as check number and payment date.
4. Hit OK and Save & Close after entering all the relevant information.

As a future help, let me add this article in case you run into QBDT company data integrity problems: Verify and Rebuild Data in QuickBooks Desktop.

We're always here in the Community should you need further assistance setting up and paying FUTA and SUTA taxes in QBDT. We'll do our best to assist. Take care.

Thank you for your response. It was very helpful!

Hello, Renee87.

Thank you for returning to this thread and confirming that my colleague's suggestions above worked for you. It's our main priority to help you navigate through QuickBooks with ease.

We're glad to help you with any issues related to QuickBooks. If there's more, feel free to get back to this thread. We're always here for you 24/7.

I have an employee that is receiving LTD, the Medicare and SS tax is being deducted however we are responsible for preparing the W2 for the disability benefits paid to the employee.  How do I enter this in QB desktop?

You can create a company contribution item in QuickBooks Desktop (QBDT) to record the disability benefits provided to your employee. dwalker2. I'll guide you through the setup process.

To begin, go to the Lists menu and select the Payroll Item List. Follow the steps outlined below:

1. Click on the Payroll Item ▼ dropdown and choose New.
2. Select Custom Setup and click Next.
3. Choose Company Contribution and proceed with Next.
4. Input the item name and click Next.
5. Select the agency where the liability is paid (or add it), provide the account number, and specify the expense account for tracking the item. Tap Next.
6. Set the tax tracking type to None and hit Next three times.
7. Keep the Default rate and limit fields empty. You can add these details when assigning the item to the employee profile.
8. Finally, click Finish to complete the setup.

Once done, add the item to the employee profile. Here's how:

1. Go to Employees and then Employee Center.
2. Choose the specific employee.
3. Click on Payroll Info.
4. Under Additions, Deductions, and Company Contributions, include the health benefit insurance items.
5. Input the amount per period and the limit.
6. Click OK to save the changes.

Check out this article for detailed guidance on handling payroll items related to your insurance benefit scheme: Set up and manage payroll items for your insurance benefit plan.

Furthermore, you can generate a payroll summary report within the software to monitor the payments made through your QuickBooks payroll system moving forward.

Kindly reach out anytime if you have more questions or need assistance managing payroll-related queries. Just come back to this message, and I'll be here to help you promptly. Stay safe.

We don't pay the disability income benefit our insurance company does and they deduct Medicare and Social security Tax.  We are to prepare the W2 for the disability benefits paid to the employee.

Hi there, dwalker. We can create company liability adjustments since your insurance company pays the disability income benefit and deducts the Social Security and Medicare taxes. 

To create a company liability adjustments: 

1. Hover to Employees, then Payroll Taxes and Liabilities. 
2. Click Adjust Payroll Liabilities.
3. In the Date and Effective Date fields, enter the date you want the adjustment to affect your liability balance. 
4. In the Adjustment is for section, select Company.
5. Under the Item Name column, select Social Security Employee and Medicare employee and enter a negative amount of the tax withheld. 
6. Select Accounts Affected, then choose Affect liability and expense accounts. Click OK to close the Affect Accounts window.
7. When prompted for an account to associate the adjustment with, select the Asset Account associated with the employee advance payroll item. 
8. Now, create your employee's W-2. 

You might also want to run a payroll report to see a detailed summary of your payroll expenses, including employee salaries, bonuses, taxes, and other related costs in the future. 

Moreover, I'll add these articles as a guide in filing W-2 and managing your employee's paycheck in QuickBooks Desktop:

• File your W-2 and W-3
• Edit, delete, or void employee paychecks. 
• Refund your employee for a deduction that was over-withheld. 

You're always welcome to revisit this thread whenever you require assistance entering a transaction or recording disability benefits paid by insurance companies. I'm here to help you anytime. 

I have an employee that is receiving LTD payments through a third party. I need to record and pay the FUTA and SUTA withholding without triggering a W2. I know how to calculate this amount without running through payroll, but how do I record this payment in QB and put it toward this employee without running payroll? Thanks for any help.

I appreciate you reaching out for assistance, FreeFire. To ensure accurate recording of Third-Party Sick Pay, I recommend contacting our dedicated support team for tailored guidance.

Before doing so, please verify the following information on the third-party report, as it is required by the IRS for reporting purposes. If any information is missing from the third-party report or Explanation of Benefits (EOB), contact the third party to obtain it:

• Employee's name
• Employee's Social Security Number
• Sick pay paid to the employee
• Federal income tax withheld
• Employee Social Security tax withheld
• Employee Medicare tax withheld
• State tax withheld
• Federal Employer Identification Number (EIN) number

Once you have all the necessary information, contact our Payroll team for further assistance.

Here's how:

1. Go to the Help menu at the upper right.
2. Choose the Search tab.
3. Select Contact Us at the bottom of the screen.
4. In the Ask about something else section, enter your concern.
5. Hit on Continue and choose a way to connect with us.

Our customer service hours for Payroll Core are Monday through Friday from 6 AM to 6 PM PT. For QuickBooks Online Payroll Premium, Elite is available any time, any day.

Additionally,  you might want to check this article and learn how to view payroll tax payments and forms in QuickBooks Online Payroll: View your previously filed tax forms and payments.

I'm more than willing to help again if you have more concerns about managing your employees, the paychecks, and other payroll-related tasks. Drop a reply below or create another post. My team and I are always ready to assist you.

@Aldren18 although your email did have the exact answer I was looking for, it sparked the idea making an adjusting entry. (I am also using Desktop.)  I actually found if I go to the Payroll Center and click on Adjust payroll liabilities, I was able to record the FUTA/SUTA taxes there for the employee and then payment popped up on my liabilities to be paid. Thanks for your quick response and help.

Hi there, FreeFire06.

I appreciate you for getting back in this thread. On behalf of our team, I thank you for sharing some helpful information on recording an employee's LTD payments associated with tax withholding.

Additionally, you can check out these helpful articles that can help you with you manage your employee taxes: 

• Exempt your employee from Federal or State Withholding
• Set up employees and payroll taxes in a new state

Please know that we're committed to providing you with the best possible customer service experience. You're always free to reach out in this forum if you have other payroll concerns. I'll always got your back.

I am using QuickBooks Online.  I have called them for help several times on the issue of recording a third party payment to an employee and related taxes.  After spending several hours on the phone I have never been given correct information.  Can you help?

Susan