Refund terminated employee health insurance deduction

WWPlumbing · ‎March 08, 2021

The manager terminated an employee who was eligible for health insurance April 1st. The last two paychecks had health & dental deductions. I had already processed his direct deposit paycheck this morning, not knowing the employee was terminated last week when I was gone. This paycheck, essentially is his final check. How do I reimburse the employee for the deductions made in his last two paychecks, totals $148.06. I am using Desktop Pro 2018. In my mind, I would simply write a check to the employee, crediting the liability accounts but I am guessing this would mess up the liability balances between the balance sheet & the payroll module.

Thanks

Dotti

IamjuViel · ‎March 08, 2021

Hello there, @Dotti.

You can create a reimbursement payroll item to track and account your employee's health insurance deductions. I can guide you in doing so.

Here's how:

Go to the List menu.
Choose the Payroll Item List.
Click the Payroll Item button, choose New.
Select Custom Setup, click Next.
Pick Addition from the item type list and click Next.
Choose an expense account. This allows you to set up an account to track the money you owe the employee for reimbursements.
Set Tax Tracking to None and click Next.
Select the option to Calculate on Net Pay and click Next.
Enter the default rate and click Next.

Once completed, you can assign the reimbursement payroll item to the employee's record under the earnings column.

Click the Employees menu.
Choose the Employee Center.
Double-click on the Employee's information.
Pick the Payroll Info tab.
Click the drop-down menu for Additions, Deductions and Company Contributions.
Select the item from the list that you wish to add to your employee's paycheck.

Now, you can run a second paycheck solely for the reimbursement. By doing this, you can make sure that the liability balances are tracked accurately.

Get back to us here if you have other questions or concerns. I'm always here to help.

View solution in original post

IamjuViel · ‎March 08, 2021

Hello there, @Dotti.

You can create a reimbursement payroll item to track and account your employee's health insurance deductions. I can guide you in doing so.

Here's how:

Go to the List menu.
Choose the Payroll Item List.
Click the Payroll Item button, choose New.
Select Custom Setup, click Next.
Pick Addition from the item type list and click Next.
Choose an expense account. This allows you to set up an account to track the money you owe the employee for reimbursements.
Set Tax Tracking to None and click Next.
Select the option to Calculate on Net Pay and click Next.
Enter the default rate and click Next.

Once completed, you can assign the reimbursement payroll item to the employee's record under the earnings column.

Click the Employees menu.
Choose the Employee Center.
Double-click on the Employee's information.
Pick the Payroll Info tab.
Click the drop-down menu for Additions, Deductions and Company Contributions.
Select the item from the list that you wish to add to your employee's paycheck.

Now, you can run a second paycheck solely for the reimbursement. By doing this, you can make sure that the liability balances are tracked accurately.

Get back to us here if you have other questions or concerns. I'm always here to help.

WWPlumbing · ‎March 09, 2021

Thank you! I did follow your process and was able to print a check to reimburse the employee for the amount deducted in the two paychecks. However, it occurred to me, shouldn't the liability accounts be reduced by the amount the employee contributed to the insurance premiums? ie...if I withheld $22 in total during March for the April dental premium, the $22 would have gone to the liability account. I can't leave this in the liability account. I will look at doing a payroll liability adjust account. Hopefully, I can offset the expense account I attached to the reimbursement payroll item I created. Thanks again for your help. I would have been lost in how to even start the process.

Dotti

sescarpa1 · ‎August 09, 2021

HI - I am up against the exact same thing. One of our employees moved and his final paycheck did not account for the $260 co-pay he paid towards his health insurance. I simply created a new paycheck where I zeroed out the salary so that there were no earnings, then in "Other Payroll items" - Health insurance withholding (the account always used for the deduction) and created a positive deduction. I adjusted the company and employee summary to zero out any taxes withheld. This created a paycheck for the net pay $260, which I am able to direct deposit, rather than mail a check.

I am hoping this makes his final w-2 accurate and doesn't mess me up with quarterly tax reports.

I'd love any feedback!

AMCRPM · ‎October 29, 2021

For lines 7 & 8, do these parameters apply to refunds on "Pre-Taxed" deductions?

katherinejoyceO · ‎October 29, 2021

Thanks for joining in this thread, @AMCRPM.

The tax tracking type would determine how it will impact the tax forms. Hence, the item in lines 7 & 8 depends on the tax tracking type of pre-tax deduction used.

For instance, you're using the simple IRA for tax tracking when creating a deduction, it will reduce the wages in lines 1 and 2 in the 941 form.

You can check out this article to learn more about how each line on Form 941 is generated in QuickBooks: How QuickBooks populates the 941.

Let me know if you have other questions. I'm always around to guide you more.

KT_83 · ‎November 01, 2021

If the health insurance was taken out pre-tax wouldn't the amount needing to be refunded need to be taxed? If it is created as a reimbursement, it wouldn't be taxed... correct?

MaryLandT · ‎November 01, 2021

Yes, it won't be taxable as long as you set up the item as a non-taxable reimbursement, KT.

When creating paychecks, the addition item will appear in the Other Payroll Items area of the Preview Paycheck screen. If the item is based on quantity, be sure to enter the appropriate amount in the Quantity column.

I'm adding this link to help pay your employees: Learn how to create paychecks. It provides detailed steps as a guide.

Let me know if there's anything else you need concerning payroll. I'll be right here to help pay your employees.

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Refund terminated employee health insurance deduction