Paying medical premiums in Payroll liabilities

Hi there, jonesdds.

Thank you for posting here in QuickBooks Community.

Can you please provide additional information on how you set up the deductions in QuickBooks Desktop. And, how did you offset the amount or zeroing out the expense in payroll taxes and other payroll liabilities? I'd appreciate any further details so I can present accurate information.

If you have any more questions or concerns, please don't hesitate to comment below. Have a good rest of your day!

To answer this question correctly, need to know how you selected to file taxes: C Corp or S Corp?

Hate to say that both of the methods/entries you described sound incorrect.  

Can you not see my screenshot showing how I'm paying the liabilities?  If not basically in my Payroll Center, in Payroll Liabilities I have say $1000 liability due for medical insurance.  That $1000 is the collective deductions taken pretax for all employees but me for one month.  Not including myself.  Then when I pay the liability and the screen comes up in the splits under the Expenses tab I enter a -1000 under the payroll liability account and change the amount of the transaction to $0.  My premium in full and my portion of the staff premiums all are expensed as a Medical Expense, not through payroll liabilities.

I am a S corp.

I've set up the deduction for Health Insurance premiums-pretax deduction from employees check-and the liability account is the one that I'm talking about above that the negative offset amount points to.  Also, when I pay the medical ins premium, it all goes to that same payroll liability to pay it down.  Tax tracking type is "Premium Only/125" and under Taxes, all state and fed payroll items tax related are checked.  Under "Calculate based on Quantity" it's "neither" thats checked.  Then Default rate and limit is $0 and Annual, restart each year is selected.

Hopefully this all makes sense, thank you

Thank you for sharing the details on how you set up your payroll items, @jonesdds,

Let me help share information about the posting accounts of both of your payroll items for you and your employees' insurance premium. I want to ensure that you've set it up the best way so your liability is calculated and paid correctly.

To start with, let's review the expense and liability accounts of the created company contribution payroll item to make sure that the liability account of the deduction payroll item is the same. To do so:

1. Go to Lists.
2. Select Payroll Item List.
3. Find and double-click to open the information of the company contribution and deduction payroll item.
4. Click Next.
5. Review the expense and liability (company contribution) and liability (deduction) accounts of both payroll items.
6. Click Finish to confirm any changes you've made.

From here, we'll also need to review the payment method of both payroll items. This way, we can identify if both of your payroll items have a scheduled liability payment or not. Here's how:

1. Go to Employees.
2. Select Payroll Center.
3. Click Pay Liabilities.
4. Under Other Activities, select Change Payment Method.
5. On the Scheduled payments, select and review the methods of your company contribution and deduction payroll items.
6. Select Edit.
7. Click Finish to confirm the changes you've made.

Now if all the payment has not been reconciled, you'll have to delete and recreate them base on the scheduled liability payments of both payroll items. To learn more about this payment method, here's a link you can visit for reference: Set up and pay scheduled or custom (unscheduled) liabilities.

But if all the payment made has been reconciled, you'll have to review each payment created, remove the negative amount, and change it by adding the portion of the company contribution payroll item.

Lastly, I've got you this helpful article for steps to resolve any instances that the payroll item is not calculated correctly as reflected on your employees' paycheck: QuickBooks Desktop calculates wages and/or payroll taxes incorrectly.

If there's anything else that I can help you with, let me know in the comments. I'll be here to lend a hand.

A >2% shareholder of S Corp, is not required to pay any of that health insurance out of pocket.

Your company can pay 100% of the premium for you. 

Total is added to W-2 as imputed income so that you pay taxes on it.  

Employees get to do Pre-tax deduction but you cannot. 

This amount of expense on company tax form 1120s and personal 1040 must match W-2 total.   

Just Google to see this on IRS website.

So on payroll, you should see:

For owner, his premium 100% on W-2 as imputed income.  (Box 1 and 14 as I recall).

For employees, their contribution of the portion you designated as employee paid.

Income statement accounting should show:

Full expense for total premiums paid with reduction for employee contributions.

IRS Tax Return Form 1120S:

Total paid by company as expense

IRS Tax Return Form 1040:

Amount paid for > 2% shareholder

I should add I am single owner/employee of S Corp for the last 12 years so I know this is correct.

I have done accounting for 35+ years and my tax lady is a former IRS auditor (20 years younger).

Almost all of my 96 consulting clients are S Corp also and some are single owner/employee.

Most also use my tax lady too.

I think all of this is happening as far as taxes are concerned.  But it does make it difficult to have the accounts be clean and easy to see if everything is matching up and all liabilities are being paid.  But, I don't think its happening the way it should, I'm not doing this the way it's intended.

On a slightly different note I've never been able to get a straight answer on when to deduct for employees.  Maybe I'm doing it right, maybe not.  Currently I pay semi monthly and the pay period ending the 15th and the last day of the month's deductions are what are used to pay the premiums that are due on 1st of following month(often paid later in the month).  Is this set up typical?

Thanks for coming back and provided us in-depth details of your payroll concerns, jonesdds.

If you set up your employees for a semi-monthly schedule, the 1st pay can be in the middle of the month, and the 2nd is at the end. The common payouts for this schedule are every 15th and 30th of the month. That makes 24 payouts per year. You can check out this article for more details: Set up and manage payroll schedules. 

For your question of when to deduct your employees for the medical premiums, then it depends on your deposit schedule requirements enforced by the tax agency. Each tax agency enforces different rules and guidelines that determine how often you should pay your payroll taxes. The deposit schedules are based on how much tax liability you accrue during a tax period, not how you pay our employees. 

For example, the monthly payroll tax depositors must make their tax deposits by the fifteenth of each month. When the fifteenth falls on a Saturday, a Sunday, or a legal holiday, tax deposits are due on the next business day. If you're not sure what your tax schedule is, it would be best to consult your accountant or your tax advisor. This way, we ensure QuickBooks tracks your scheduled tax payment accurately and to avoid any penalties or interest imposed by the tax agency for late payments. 

To learn more about tax deposit due date and setting up tax payment schedule, check out these articles:

• How to set your tax deposit due dates
• Set up and pay scheduled or custom (unscheduled) liabilities

To assist you in matching up and checking if all liabilities are being paid, feel free to contact our Payroll support Team. They'll pull up your account in a secure environment and help you with this one. Here's how to reach them:

1. Click the Help icon on the top menu. 
2. Choose QuickBooks Desktop Help. 
3. Tap Contact us.
4. Select Search for something else and enter your concern in the Tell us more about your question: field. 
5. Tap Search. 
6. Choose Start a Message or Get Phone Number to connect with our support. 

I've got a link here where you can find articles about managing your payroll in QuickBooks: https://quickbooks.intuit.com/learn-support/en-us/get-started/07?product=QuickBooks%20Desktop%20Payr....

The Community will always have your back if you need a hand with processing your payroll forms or any QuickBooks related. We are just one post away. Have a great day. 

@jonesdds 

Agree 100% of health insurance paid by company should be expense on P&L (Income statement). All Liability accounts s/b amounts OWED but not yet PAID.  Once paid the liability clears to zero.

Not clear if QB is to make the payments for you, just calculate amount for you or just notify you when due. Sounds like they want you to pay along with payroll taxes, which makes sense if they are paying it for you.

If not, I suggest:

Pay PERIODS ending 15th and EOM work better than PAY DATES 15th and EOM.  This helps capture entire month in same period with revenue and billing. If you are billing employee time, you need cut-off date or would have to carry over to next month or do manually every other month if period ends 30th vs EOM. 

I'm not understanding why this morphed into talking about taxes and payment of those liabilities, that is not an issue for me.

For the medical premiums since mine is fully expensed as an expense for the corp and not taken out pretax it doesn't show as a liability in payroll.  Also the $150/month for each employee I contribute also doesn't show as a payroll liability.  All that does is the pretax premiums taken out for all other employees.

As an example, lets say my premium is $1000/month and my 4 employees is $400/employee or 1600/month.  So, the payroll liability  each month is $250/employee or $1000.  And then the next month, generally about the 10th I'd pay the medical premium.  That payment would be $2600 then.  $1600 would then be expensed as "Medical Expense" and $1000 would be in payroll liabilities to be paid.

So currently I have splits of Medical expense for $1600 and the $1000 is expensed in the Payroll Liabilities-Anthem account which of course pays down the liability in the account.  But, the Liability still shows up in the Payroll liabilities in the Payroll module.  So I need to get rid of that and the only way I can see that happening is to do what I described above to zero it out.  

There has to be another way to do this cleaner, it's not the way it's intended to work.  If the entire premium showed as a liability then it would be simple but given it has to be split up this way it's confusing and I assume not being done correctly.

Hi there, jonesdds.

I know this is a bit tricky and complicated. For us to better assist you, please reach out to our Payroll Specialists so they can check it for you. 

1. Go to the Help menu and choose QuickBooks Desktop Help. 
2. Tap Contact us. Select Search for something else and enter your concern in the Tell us more about your question: field. 
3. Click Search and choose either Start a Message or Get Phone Number.

The Community is always here if you have additional questions. Stay safe!

@jonesdds 

It seems you are making this harder than it should be.

I think you might not be understanding how the accounting works.

100% of the insurance is paid by your company to the insurance company, correct?

The fact that employees pay part of that total is a second and separate transaction. 

Suggest forget about the payroll portion for a moment to understand how this works.

Pretend with me for a moment that you are paying payroll manually (horrible thought).

1) You receive invoice from insurance company to be paid, accounting entries would be:

Debit Insurance Expense 100%

Credit Insurance Liability 100%

2) You pay insurance company:

Debit Insurance Liability 100%

Credit Cash (QB=Bank)   100%

3) Employees pay you their %:

Debit Cash (QB=Bank) their $

Credit Insurance Expense for their $

4) Now your books should show:

Cash/Bank less company paid portion

Insurance Liability equals Zero as it should

Insurance Expense equals company-paid portion

----------------------------------------------------------------------

You should be able to put 100% of the insurance in the liability account to be paid, even if company-paid.

You should be able to put 100% of the insurance on payroll for you and employees even if company paid. 

I unfortunately don't think like an accountant or bookkeeper so I have a hard time following.  And speaking to customer service with QB is a waste of time, I can't understand them at all for a lot of reasons.

So for my set up of the payroll items I have a pretax item set up for the staff contributions that puts those deductions into the payroll liability.  Then I have another payroll item for the company contributions(mine in full and then $150/month for other employees.  In this one the liability account is the same Anthem liability account but the expense account is set up as Medical Contributions by company.

Should I have the expense account also be the liability account?  Then when I pay the liability it should be the entire amount and I can expense it out when I pay it.

I appreciate the screenshot you‘ve provided, @jonesdds.

Allow me to share some insights about choosing an account when creating a payroll item in QuickBooks Desktop (QBDT). You’ll need to select an expense account in the Expense account field in mapping your payroll item.

That way, when running payroll using the payroll item you've created, it'll automatically generate the expense and liability account. Then allocate the liability account to show it as paid when paying.

Additionally, I'd recommend consulting with your accountant in choosing an expense account. This way, we’ll ensure your accounts is well accounted for after you run your payroll.

I also have here some resources that you can read for guidance in managing your payroll in QBDT: 

• Get started with Payroll
• Edit a payroll item
• Edit payroll items used on paychecks

You can contact us anytime you have other concerns or questions about managing your payroll in QBDT. I’m just a post away from you. Keep safe and have a great day.

@jonesdds 

Did you get this to work or still need help?  No need to think like an accountant, but if you are doing your own bookkeeping, you need to know what you are doing or will just make a mess of things and will cost you a lot more to fix later than to do it right the first time. Usually cost ~ 4x more to clean up mess later.

In order to make your payroll entries correctly from automated system function, you must first understand how the entries should/would be made manually so you can be sure they are correct when system does.

What I described above are the three different transactions and the entries that would be made for them.

1) Input invoice from insurance company into QB

2) Pay the insurance company for that invoice

3) Employees pay you their share

Every transaction is has a debit and a credit.  (A positive amount and a negative amount) 

Every transaction debits one or more accounts and credits one or more accounts and they must balance.

Meaning total debits must equal total credits on any transaction.

I know I'm late to this party, so not sure if I'll get a response. But, I just want to make sure I'm understanding correctly.

1. Pay insurance premium from company expense account.

2. Employee deductions go into payroll liabilities.

3. Do a monthly journal entry moving the liabilities into the expense account?

You got it correctly, @I_need_a_bookkeeper.

Before you proceed with the steps, I highly suggest consulting your accountant or accounting professional for guidance to track it correctly in your QuickBooks account.

If you don't have an accountant yet, you can have one. You can find an accountant near your place through this link: https://quickbooks.intuit.com/find-an-accountant/.

Please know that you're always welcome to post if you have any other concerns. Wishing you and your business continued success.

I totally understand this frustration. I am dealing with the same issues regarding health insurance premiums.  I also have another question about the setup for the premium payment.  There is only one option in the setup for the premium to be paid on a certain date for the "previous month, quarter, or year's" liabilities.  The insurance company bills me at the end of the month for the following month's liabilities.  So every payment has the wrong period.  Apart from changing the dates every single month, how can I fix this?

Health insurance is one of few expenses you must pay in advance for services each month, similar to rent.

My suggestion inn general and even more so with what you are describing regarding entries for past period:

Record AP invoice for insurance due:

DR Health Insurance expense on P&L

CR Health Insurance liability on Bal Sht

Pay health premium via AP when due:

DR Health Insurance liability to zero 

CR Cash for total amount paid for it

Record employee contributions last:

CR Health Insurance expense account

DR Accrued Payroll Payable Liability

Thank you.  This would work if I was doing journal entries.  I am not.  I am just trying to use the payroll liabilities feature.

Does feature not allow you to use an Expense account for credit side of entries to QB General ledger?   

Debit goes same place either way reducing Accrued Payroll Payable since deducted from Gross Pay.

If not, you have two parts of liability, one for employee contributions from payroll and one from AP.

Hopefully, amount you pay for health insurance premium matches the sum of those two exactly.

Harder target to hit but confirms recon should match exactly.

Think of this like if you went to lunch with someone and they paid you their half after you paid bill.

Yes, I understand what you are saying, but my question is about the dates.  There is no where in the payroll setup of these accounts to specify that I want the payment this month to be for the following month.  The only payment frequency option is for it to be for the previous month, week or year.  

Thanks for getting back to us, @llee0429. I'm here to share some insights about setting up a pay frequency for your premium payment. 

When entering a deduction for insurance premium, it should be entered as pre-tax deductions. You may also want to ensure that your payroll table is set to reflect the correct payroll frequency for your company. I want to ensure that you've set it up the best way so your liability is calculated and paid correctly.

You can start with getting the latest payroll tax table. I'd be happy to show you the steps below:

1. Go to the Employees menu, then select Get Payroll Updates.
2. Select the Download Entire Update checkbox.
3. Click Download Latest Update.

Once the download is complete, you can proceed to manage the premium schedule. To know information, you can check out this article: Set up and pay scheduled or custom (unscheduled) liabilities. This contains tips on how to ensure that your payroll data is correct.

I'd also recommend speaking with your accountant. Your accountant will know more information to provide based on your business needs. If you don't have an accountant, you can find one here in our Resource Center.

Moreover, I've got you this helpful article for steps to resolve any instances if the payroll item isn't calculated correctly as reflected on your employees' paycheck: QuickBooks Desktop calculates wages and/or payroll taxes incorrectly.

If there's anything else that I can help you with, let me know in the comments. I'll be here to lend a hand. Take care!

Thank you for all the information, however, my question is still unanswered.  I guess Quickbooks just does not have the option to set up health insurance payments dated in this month to be for the following month.

Thanks for following up with us, @llee0429. I understand how important it is to change the health insurance payment date in QuickBooks Desktop.

At this time, setting up health insurance payments dated for this month to be for the following month is unavailable. You’ll want to ensure that your payroll table is set to reflect your company’s accurate payroll frequency by following the steps provided by my colleague above.

For more information about using a liability adjustment to correct employees’ year-to-date or payroll info, I recommend checking out this article: Adjust Payroll Liabilities in QuickBooks Desktop.

Additionally, you may want to use QuickBooks to set up calendar notices to notify you of upcoming payroll tax and liability payments. To learn more about the details, I encourage you to browse this article: Set up and Pay Scheduled or Custom (Unscheduled) Liabilities.

Additionally, you may want to check out these articles to learn more about managing your payroll liabilities and payroll reports in the future.

• Set up and Pay Scheduled or Custom (Unscheduled) Liabilities.
• Payroll Summary report.
  
  

If you have any further questions or concerns about managing your payroll in QBDT, please know that you can always tag my name. I'm here to help you in any way I can. Enjoy your day!