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bjk1
Level 1

S Corp Owner health insurance

I'm trying to add S Corp Owner's health insurance to the owner's payroll in QB Online via Run Payroll: Fringe Benefit Only.  I can add the fringe benefit amount and override the employee's Federal & NY state tax withholdings, but the system doesn't allow me to override the local NY City withholding tax.  Why and is there any workaround?     

7 Comments 7
Maybelle_S
QuickBooks Team

S Corp Owner health insurance

Glad to see you here in the Community, @bjk1.

 

The Do Not Withhold option for federal and state income taxes in the employee's setup/information may have been checked. To verify this, let's proceed to the employee's profile.

 

Here's how:

  1. Go to the Payroll menu, and then select Employees.
  2. Select the name of the employee to open their profile.
  3. Click the edit pencil icon beside Pay.
  4. Next to the withholding section, click the edit pencil icon.
  5. Check the Federal Filing Status/State Filing Status.

Also, you can run a payroll report to check the details of your employees. I suggest you use the Payroll Summary by Employee report to view a comprehensive report of wages, deductions, and tax info.

 

You may also consider checking out this article for more insights about why this is happening: 0.00 or no income tax withheld from a paycheck.

 

Drop a comment below if you have other questions. I'm more than happy to help. Take care!

bjk1
Level 1

S Corp Owner health insurance

Thanks for replying Maybelle, but you misunderstood the issue.  The employee's withholding setup is correct.  Federal withholding, state withholding & city withholding are all applicable to this employee's normal compensation and was in fact properly done throughout the year.   

 

The issue is that since this employee is also the S Corp owner, his health premiums (paid by the company during the year) need to be added to his gross taxable compensation for payroll reporting (W-2, 941, 940, etc.).  This fringe benefit is not subject to Social Security, Medicare, or income tax withholding.  After I enter the fringe benefit amount [Run Payroll: Fringe Benefit Only] I click on the pencil and expand the Employee taxes category.  Here's where the problem is.  The Federal income tax, NY State income tax and NY City income tax boxes are all pre-populated with tax withholding amounts.  The system allows me to override Federal and NY State withholdings to zero....but does NOT allow me to do the same in NY City withholding.   

JonpriL
Moderator

S Corp Owner health insurance

Hello @bjk1,

 

Since you're still unable to edit the state withholding amount for the owner's payroll, I'd recommend contacting our Payroll Care Team.

 

With their tools, one of our specialists can help you on how to enter the correct amount withheld in a payroll. To do so:

  1. Go to Help.
  2. Select Contact Us.
  3. Enter Payroll Withholding in the What can we help you with? field.
  4. Click Continue.
  5. Choose a channel where you wish to connect with our dedicated support.

In the same manner, I've got you this helpful article for guidance in preparation for the 2020 tax season: QuickBooks Online Payroll Year-end Checklist.

 

If there's anything else that I can help you with, please let me know by leaving any comments below. I'll be here to lend a hand.

bjk1
Level 1

S Corp Owner health insurance

Yes, that's what I've done and I'm waiting on your back-office technicians to resolve the problem.

 

It's just very frustrating that I continue to have this very same issue each & every year and the software development team has yet to implement a program change that would undo this system deficiency / limitation.  And this time around I've been told that QB Online is charging me a fee for this assistance when in all prior years it was done free of charge. 

deanna@healthsum
Level 1

S Corp Owner health insurance

I have the same problem but I am in California.  The only other option I have is to run a regular payroll for December and then do a Fringe Benefit adjustment for the S Corp Health Insurance benefit. This way, Social Security and Medicare Taxes are at zero amount.  However, it adds federal, state, and city income taxes withholding.  It also creates an Employee Tax Loan so that it will deduct the taxes on future paychecks.  

I can’t find anyone on Support to help me.  I have called 4 times yesterday and no one seems to know the answer.

i am stuck now and can’t finish payroll.  Please help me.

Deanna 

KurtKyle_M
QuickBooks Team

S Corp Owner health insurance

Thanks for chiming in on this thread, deanna@healthsum. Let me share some information about your query.

 

 

We have this option to lower or zero out taxes.

 

 

For Intuit Online Payroll/Intuit Online Payroll for Accountants, these are the steps:

 

 

  1. Select Payday. If necessary, also select a pay schedule. From the Check Type drop-down, choose Fringe Adjustment.
  2. Select Go and then update the Pay Date.
  3. Make sure only the employee(s) who need to have S-Corp recorded are selected. Then in the S-Corp Ins. field enter the dollar amount for S-Corp premiums that need to be recorded. When you're finished, select Create.
  4. Select the blue View/Edit button. Then select the gray Edit button to edit the pay check
  5. From here, you can lower or zero the federal and state income taxes, according to the customer's wishes. Once you've got those set, check to make sure that the Employee Tax Loan deduction shows a current amount of $0.00. Then select Save. As long as that deduction isn't being used, it will disappear automatically once the pay check is submitted.
  6. If everything looks correct, select the blue Approve Paychecks button to finish the process.

 

Zeroing out the Federal and State Income Taxes has tax implications. This is because the IRS may reassess taxes owed when the employee files their personal income taxes.

 

 

A reminder, if you are unsure of the steps that are mentioned above. You can consult your preferred accountant for other options.

 

 

Since tax season is just a month away, you might want to give this page a visit.

 

 

Please let me know how it goes by clicking the Reply button below. I'll be around to help.

deanna@healthsum
Level 1

S Corp Owner health insurance

Thanks for the tips.  

 

However, if I do it your way, the salary and 401k deduction becomes 0.

Is it okay to Run Payroll like a regular paycheck which means just like the previous month since I am on salary and then Run the Fringe Benefits Only afterwards?  This way I have my regular salary taxed and have my 401 K contribution deducted.

 

My accountant said that the s corp owners health insurance is taxed by federal and state.  However, it was nice to know that I could lower that to zero now and worry about the tax later when I file my income tax.  Is that okay?

 

 

 

 

 

 

 

 

 

 

 

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