Setting up 162 Bonus Plan for an Employee in QBO

Let me share some information about setting up payroll deduction item and guide you to the right support, pdrmmr.

The option to automatically track the 162 Bonus Plan for employees is unavailable in QuickBooks Online (QBO). You can set it up as a deduction payroll item. Then, choose if it is a  taxable or pre-tax insurance premium based on your plan documents.

Once done, manually enter the deduction on the paychecks to divide it for a 26 day period.

For more details about adding deduction payroll items, please refer to this article: Add or edit a deduction or contribution.

To further guide you on how to set it up and track 162 Bonus Plan, it would be best to contact our Payroll Support Team. They'll pull up your account in a secure environment and guide you to the setup. They'll also provide you detailed information on how it will be reflected in the W-2 form.

Here's how to reach them:

1. Click Help on the top menu.
2. Hit Contact Us.
3. Enter your payroll concern in the What can we help you with? field.
4. Tick Let's talk.
5. Choose Start a chat, Get a callback or Get the number to connect with us.

I've got a link here that provides you with articles about managing payroll in your Online account: Pay employees, enter timesheets, and send payroll forms.

Keep me posted if you need a hand with running payroll reports or any QBO related. I'm always here to help.

Thank you for your reply. The company is paying the life insurance premium directly for the employee. The employee owns the policy but is only paying the taxes, not the premium, thus the fringe benefit. So the only thing we want deducted from his check are the taxes on the amount, which reduces his net pay. How do we do this? 

Thankyou. The company pays the life insurance premium. The employee owns the policy. The only thing we want deducted from the employee's check are the taxes on the premium amount. How do we do this?

Thanks for your quick response, pdrmmr.

What my colleague suggested above is right where you can add another deduction payroll item to your employee's paychecks. I would recommend reaching out to your insurance provider to verify what type of deduction you are going to use. 

Also, we'll need to figure out where the items fall either in the Taxable insurance premium or Pre-tax insurance premium by verifying this to your insurance provider. Please consider checking the article shared by my colleague above. At the bottom part of the page, you'll know what does these options means.

Now, I'll walk you through step by step on how to set it up in QuickBooks Online:

1. From the left panel, click Workers.
2. Click the Employees tab and select the name of the employee under the Employees list.
3. Click the Pencil icon next to Pay.
4. Under the box 5, click +Add new deduction.
5. Choose Deduction/contribution under Deduction/contribution or garnishment.
6. Then, you can select New to add another deduction and choose what type is it.
7. Choose either a Taxable or pre-tax insurance premium based on your plan documents. You can contact your plan administrator for further assistance. 

Please know that I am right here together with my colleague to help you more in case you have additional questions about QuickBooks Online payroll.

Thank you, but I must not be making myself clear.  We don't want to deduct the insurance amount from the employee's check. The company has purchased the life insurance and paid the insurance company directly for the year.  It is a fringe benefit to him as a "company contribution" on his paycheck.  We only want the taxes on the contribution to come out of the employee's check, not the insurance payment.  The total company contribution for his insurance needs to show up on his W-2 in box 14 at the end of the year.

QB desktop allowed this. Is there no way to create a company contribution like this (not a deduction) that will just reduce the Employee's net pay due to the tax on the insurance portion?

I'd like to share some information, pdrmmr.

Each payroll item figures are reported on the different boxes of the W-2 form. In QuickBooks Online, these are the supported fringe benefits that will categorize the amounts on Box 14: 

• Clergy Housing (Cash): This will increase the Net Pay and the amount show in Box 14 W-2
• Clergy Housing (in-Kind): This will not affect the Net Pay and will be reported on Form W-2 Box 14
• Personal User of Company Car (PUCC): This is taxed as regular wages and will be reported on form W-2 box 14
• S-Corp Owners Health Insurance: This pay type is subject to federal and state withholding (income) taxes. Reported on form W-2 box 14.

I've got these articles that you can use for reference:

• Add fringe benefits to paychecks. 
• Supported pay types and deductions explained. This article explains more of the different pay types and what boxes the figures will be categorized. 

For your situation, I'd recommend consulting with an accountant or tax advisor on how to set this up. We want to make sure your reports are accurate at the end of the year. 

If you have any additional questions, you can always leave a comment on this thread. 

Thanks RenJolynC.  My accountant had me set this up in QuickBooks desktop a couple of years and it has worked beautifully. We converted to QB Online in December and the same options for setting it up like we had it does not seem to be available in QBO.  For example, this fringe benefit is for "Life Insurance" for the employee.  He owns the policy but the premium is paid in his behalf.  This one does not seem to be supported. Can the names be changed?  I need the company contribution to show in box 14 of the employee's W-2, according to my accountant.

Glad to have you back, @pdrmmr,

I can share a few insights about the tax setup in QuickBooks Online. At the moment, the only tax types that affects Box 14 are the following:

• S-Corp Owners Health Insurance - Exempt for all taxes.
• Clergy Housing (Cash / In Kind) - Exempt for SS, Medicare and FUTA. Taxable for FIT.
• Personal Use of Company Car (PUCC) - Taxable.

Each payroll item in QuickBooks Online uses a default tax tracking which impacts the federal taxes and forms. Given that Online and Desktop versions are completely separate platforms, there are features that doesn't work the same way as the other.

A workaround to record the taxes is assigning a taxable addition item to extract the tax amount, and a non-taxable deduction item. The deduction will offset the amount so it doesn't affect the Net Pay of the employee.

Please be reminded that if you opt to use any of the items mentioned above, the system will post a specific description in Box 14 like S CORP OWNER, CLERGY HSG, and PUCC (CAR). We're unable to update the names of any default payroll items in the program.

You can also file your W-2's outside the program to report the taxes correctly. The IRS provide downloadable copies of the form from their website. Click this link then type W-2 from the search field: https://www.irs.gov/forms-instructions

If you have any other questions about this topic, feel free to mention me in this thread. I'll be more than happy to share additional help and insights whenever you need it. Have a nice day!