Set Up Pretax Aflac 100% Paid By Employee

Hi,

Can you tell me what tax tracking type you chose?

Step #7. That's the most crucial part of setting up. 

Thank you.

Hey there, @DebC-TSB. Thanks for joining the thread.

The Tax Tracking Type is None in most cases for deductions from post-tax health insurance and Premium Only/125 for deductions from pre-tax health insurance. To assess the taxability of the item, contact your health insurance administrator. To determine the tax tracking type for Health Savings Accounts and Flexible Spending Accounts or S Corp Medical, click the following links:

• HSA/FSA
• S-Corp Medical

Please let me know if there's anything else I can do to be of assistance.

Hi Michael,

Thanks for the feedback. After a few trial and errors, and creating dummy W2s, I found a way to get the premiums out of box 14.

I prefer to use "Other" tax type. These deductions show up in box 12, with a clear label of what they are. Anything but a proper HSA, 125 or other Pretax payment belonging in Box 14 with a "W", imo, is not a good idea. 

There is no way to control what letter QB puts in box 14.

How I did it: For Pretax - click off all the taxes; PostTax - leave all taxes unchecked.

Deb Cartier

TOP SECRET Bookkeeping Inc

"Because it's nobody's business but yours!"

We were told that this type of insurance premium is pretax for federal, but not for the State of California. When setting this up in Quickbooks Online, if we set it up as a healthcare deduction, it assigns pretax to Federal AND state - there is no way to separate them.

We were told by Quickbooks last year, that the only way to get it to be pretax for federal and not state is to set it up as an HSA, which seems incorrect and creates issues/errors for employees (specifically those using Turbo Tax) when taxtime comes, because the premium is appearing in Box 12, with Code W for an HSA.

Can you advise on the pre-tax status for federal vs state? Are you able to post instructions/screenshots for how to set this up in Quickbooks Online?

Thanks for joining the thread, @calicass83.

There isn't a way to make the AFLAC pretax for federal and exempt on the state. Thus, we're unable to separate them in QuickBooks Online (QBO).

The following are the exempt health insurance in QBO:

• FIT, SS.
• Med, FUTA.

This is how they're reported on federal forms:

• 941: Decreases boxes 2, 5a, 5c
• 940: Box 4 and 4a checked
• W-2: Decreases boxes 1, 3, 5

QBO calculates these taxes based on the reduced salary amount. Hence, it results in less income tax.

Check out the Pretax health insurance section of this article for more details about the supported pretax health insurance: Add or change pay types.

Also, read through the Employees and payroll taxes section of this Community resources to learn more on how to manage payroll taxes: Community help articles.

Please let me know if you need more help with managing your payroll taxes or anything else related to QuickBooks. I'll be here to help you. Take care and have a great day.

Does QuickBooks allow you to set up the deductions for the first two payrolls of the month?

I'm here to show you how you can add a deduction for the first two payrolls of the month, DragonFin.

When setting up a deduction, you have an option to select a limit type. This helps to determine how often you want to calculate it. From the Default rate and limit window, you can select Monthly - Restart each month if you're doing it monthly.

You can follow the steps shared by Kristine Mae on how to add payroll deduction.

Another way is to manually add the deduction item when running payroll. Instead of adding it to the employee's profile to prevent it from auto-calculating, you can add it to the paycheck before saving it.

Run payroll as usual, then click the Open Paycheck Detail button. From the Other Payroll Items section, manually select the deduction you created.

You'll want to check these links for more details:

• Get started with Payroll
• How do I create a paycheck for an employee?

I'll be here if you need more help. Wishing you all the best!

IRS W-2 instructions indicate that pre-tax insurance premiums paid by both the employer and employee should be reported in box 12 with code DD.  Premium Only/125 tax tracking type for employee paid health insurance premiumsdoes is not included as required.  How can that be corrected?

Thank you for joining the thread, Franklin.

You need to update the tax tracking type linked to the pre-tax insurance item. This way, amounts are reported to the desired box. I'm here to guide you with the detailed process.

1. Open your QuickBooks Desktop file.
2. Go to the Lists menu, then click on Payroll Item List.
3. Look for the item, then double-click the name to open the Edit payroll item window.
4. Hit Next until you're routed on the Tax tracking type page.

Update the type from there so the premiums are reported in box 12 with code DD. Moreover, you can also contact your Health Insurance Administrator to determine the taxability of the item. 

Here's an article you can open to know more about setting up a payroll item for insurance.

After updating the item, you need to delete and recreate your payroll. This helps you update the amounts to the correct box/code. You can check out these articles under QuickBooks Desktop Payroll  for the instructions:

• Delete or void employee paychecks
• How do I create a paycheck for an employee?

Moreover, you can skim through these articles to know more about the supported pay types and how QuickBooks populates the boxes on the IRS Form W-2:

• W2 form boxes explained
• Add or change pay types

Please let me know how else I can help you with your pre-tax deductions. I'm always here to help. Have a good one!

Is the AFLAC Pre-Tax Policy also exempt from SS and Medicate?

Hi there, @jgobbi.

Yes, the AFLAC payroll item is exempted from Social Security and Medicare. As long as this payroll item is created properly, it will show these details on the federal forms:

• 941: Decreases boxes 2, 5a, 5c
• 940: Box 4 and 4a checked
• W-2: Decreases boxes 1, 3, 5

To know more information about the deductions, you can check out this article: Add or change pay types.

I'll be here if you have other questions. Please don't hesitate to let me know in the comment section. Take care!

Why does QBD support pretax deductions other than health, dental, and vision yet QBO does not? 

Hello rjk1080,

Welcome to the QuickBooks Community! There is availability to create pretax deduction types in QuickBooks Online. Here's how:

1. Go to the employee's profile and select the employee.

2. Go to the Section 5 area and click + Add deduction link.

3. From the drop-down menu, click these deductions:

•  Deduction/contribution or garnishment: Deduction/contribution
•  Deduction/contribution type: Health Insurance
• Type: Medical Insurance.

4. Add the provider information and the amounts for Employee and Company-paid fields. 

5. Choose Pre-Tax insurance premium and click OK.

You can refer to this article for more explanation on supported pay types and deductions in QuickBooks Online.

Please reach out to me if you need any more help! Have a nice day.

That does not answer the question. What about other deductions that are pretax other than Medical, dental, or Vision? Why does QBO not offer those as selections like QBD?

Let me provide you some information about pretax deduction in QuickBooks Online, rjk1080.

A pre-tax deduction reduces the employee’s taxable income, thus they will owe less income tax. They may also owe less FICA tax, including Social Security and Medicare. Pre-tax deductions lower employer-paid taxes like the Federal Unemployment Tax (FUTA), FICA, and SUI.

In QuickBooks Online (QBO), voluntary payroll deductions include medical, dental, and vision insurance premiums both pre-tax and post-tax. On the other hand, garnishments are not voluntary deductions. You'll want to make sure that you've set up a new deduction for your employees for the deduction item to appear as an option when adding a deduction to the rest of your employees. To do this, follow the steps below:

1. Select Employees.
2. Select the employee's name.
3. Select Edit ✎ next to Pay.
4. In section 5, select + Add a new deduction or + Add deductions.
5. From the Deductions/contributions ▼ dropdown menu, choose New deduction/contribution.
6. Choose a Deduction type and Type from the small arrow ▼ icon.
7. Enter Provider name(appears on a paycheck).
8. From the Amount per pay period ▼icon, choose $ amount or % of gross pay and enter the $ amount or percentage. Do the same for the Company-paid contribution as applicable.
9. Click OK, then Done.
   
   

For more information about the updated benefit plan limits, read this article for your reference: Benefit Plan Contribution Limits for 2021.

Feel free to let us know if you have any concerns about pre-tax or other deductions. We're here to make sure that we'll be able to assist you further.

The example here is for Quickbooks Desktop.  How do set up a 100% employee paid Pre-Tax Aflac Deduction?

I'm here to share an example of an employee's profile with a pre-tax deduction, @jhudson8476.

Before we can accomplish your goal for today, may I ask for a few clarifications about your inquiry? Saying the example is for QuickBooks Desktop, are you looking for the steps needed for QuickBooks Online Payroll?

I'll be waiting for your response in the comments below. Hope to hear from you soon. Take care and stay safe!

JHudson, QB will tell you to select medical. The functionality is not there on QBO like it is on desktop to do it the right way. Frustrating.

So now that the items are set up in QBO, how do you pay it at the end of the month?  In QBD version, it continually accumulates during the month, then you just click and pay the "liability" on the day you set.  I cannot see how to do that in QBO.  It appears I would have to verify amount in my Chart of Accounts, then write a check and code it to the Other Current Liability Account that was created.  Definitely not as easy as QBD.

Thanks for sharing your concern with us, nolimitpower.

Let's check the Payroll Tax Center to see the list of liabilities you need to pay for a specific date.

Here's how:

1. Go to Taxes.
2. Choose Payroll tax.
3. Under Tax  Payments, you can see the list of taxes you need to pay.
4. Click it and follow the onscreen instructions.

If you're not seeing the liability to pay on the Payroll Tax Center, you can go to the Chart of  Accounts and write a check just like what you have mentioned.

For payroll questions when paying employees, you can have this article as your reference: Create and run your payroll.

I'll be right here if there's anything else you need help with while managing your labilities. Have a good day ahead!

The attached screen shot is all I see when I follow your suggestions.

I have over 20 years of QBD experience, but QBO seems to be its own beast - definitely a learning curve.

I can follow all the instructions until it reaches the part about selecting the tax tracking item.  I am having difficulties determining which item is best for Pretax Aflac paid by Employee.  I selected Non-Taxable sick leave.  Please advise.

Thanks

I appreciate you for following all the instructions provided by my colleague, Acctg-QPS. Allow me to assist you further so you can choose what's best for Pretax Aflac.

The Tax Tracking Type is None in most cases for deductions from post-tax health insurance and Premium Only/125 for deductions from pre-tax health insurance. 

To assess the taxability of the item, I recommend contacting your tax expert or accountant for help on the best one to use. To determine the tax tracking type for Health Savings Accounts and Flexible Spending Accounts or S Corp Medical, click the following links:

• HSA/FSA
• S-Corp Medical

In addition, you can check out the Pretax health insurance section of this article for more details about the supported pretax health insurance: Add or change pay types.

Please let me know if you need further assistance with pre-tax or other deductions. We're available to assist you 24/7.