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Level 1

Supplemental Wages Paid Separately from Payroll

We issue payroll for a non-profit.  One of their employees is now paid through a Grant.  

  • the employee's regular rate of pay, before the grant, was $11 per hour
  • the grant pays the employee directly and deducts taxes at $9 per hour
  • the non-profit is now paying the employee a supplemental wage in a separate check at $2 per hour
  • we understand how to tax the additional $2 per hour
  • We Need Advice on how this will appear on the employee's W-2s
  • The employee will receive a W-2 from the grant at a rate above minimum wage
  • The employee will receive a second W-2 from the employer at a rate less than minimum wage
  • Does this create a Red Flag or promote an Audit as to why the one W-2 is less than the legal minimum wage rate?
  • What do we need to know in this situation?

Thank you,

Janice

4 Comments
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QuickBooks Team

Supplemental Wages Paid Separately from Payroll

 Hello JLGNeelys,


Thanks for sharing how you want to process your employees’ pay. I can provide additional details about QuickBooks Online’s ways of handling such.  


The program allows you to create one W2 form for each employee profile. Since you’re processing two paychecks (for the grant wage and the regular wage), you need to select which among them to file. Then, manually file the other one to the IRS.


There are several supported pay types and deductions in Online Payroll. You’ll want to check out these articles to guide you on how they are generally reported in the W2 form. Make sure to consult with your accountant for a more specific manner of entering them.

According to the IRS, employers must file Form W-2 to any employee that earned $600 or more amount of wages in a year (in which the social security or Medicare tax was withheld) regardless of the rate. For more detailed information, refer to these links:

 

I’d recommend checking with the IRS for more options on how to manage this specific scenario. They are the best source of information to verify the proper ways of recording the grant and regular wage for the employee.


That’s it! If you have other concerns with processing payroll for your employees, please let me know. I’ll be around!

Highlighted
Level 15

Supplemental Wages Paid Separately from Payroll

You don't have a condition of 2 X W2. You have the condition of More than one Payroll Type of activity. You would have their Regular Pay, and a different Taxable Pay item. It's no different than a shift differential. Don't make this as if that is two different people. You can pay regular hourly, OT, Shift Differential, Piece Work, Commissions, etc, all on the One name and the One W2. Plus, this allows taxes to work properly.

Highlighted
Level 1

Supplemental Wages Paid Separately from Payroll

Thanks but you missed the fact that the employee IS receiving 2 W-2s.  One will come from the grant institution and one will come from the employer representing the additional $2.00 per hour.  There are 2 different entities issuing payroll to this individual to make up the total of $11 per hour.

Thanks

Highlighted
Level 15

Supplemental Wages Paid Separately from Payroll

"Thanks but you missed the fact that the employee IS receiving 2 W-2s"

 

Yes, from two different employers. It seemed like you were going to issue the Differential as if that is its own W2.

 

You are the employer and there is One W2 from you. If you don't want it to appear as if you are paying them for Hours Worked, then I would contact my State Dept of Labor to discuss with them a "Grant Placement labor" situation and that you wanted to keep paying them person their Total Rate, to see how they want you to handle it. It seems like a Stipend, but might not be advisable to run through Payroll.

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