Taxable Health Insurance Allowance as a "Pay Type" in QB Online

I have an idea of how you can do this in QuickBooks, NK-919.

But before we start, may I ask how you set up your employee's health insurance? I've tried this and set it up under Allowances under Pay Types. But it's not adding up as a contribution to 403 (b). Please see the screenshot below:

On the other hand, you'll have to set up 403 (b) as a Percentage of gross pay instead of the flat amount, so it will accurately calculate the amount. To do so, follow the steps outlined below:

1. Under Deductions & contributions, click Edit.
2. Click Add deduction/contribution.
3. Select Retirement plans on the Deduction/contribution type field.
4. Under Type, choose 403 (b).
5. On the Calculated as box, select Percent of gross pay.
    
6. Click Save.

Furthermore, learn the list of payroll reports that you can use with QuickBooks Online (QBO) to help you generate the right data for your employees. I've added this article for more information: Run Payroll Reports.

You can always let me know if you have any concerns when running payroll I'm always here to help. 

Thanks for your response.

The health insurance allowance is set up under "common pay types" as an allowance with a recurring amount of $200.  Since the allowance is only paid once a month, I simply edit the other paycheck to delete it.  The employee does make a tax deferred contribution to the 403(b) plan.  That is set up as a flat amount.  The employer contribution to the 403(b) plan is set up as a percentage of gross pay at 6 percent.  Although the health insurance allowance is taxable income to the employee, it should not be added to his salary (annual yearly salary) when the 6 percent calculation is made.

Nancy

Thanks for your response.

I've tried to respond with limited success!

The health insurance allowance is set up under "common pay types" as an allowance with a recurring amount of $200.  Although it is only paid once a month, I simply deduct the amount on other paychecks.  

The employer contribution to the 403(b) plan is set up as a percentage of gross salary at 6 percent.  The employee does make a tax deferred contribution each paycheck which is set up as a flat amount.  

The health insurance allowance is a taxable amount to the employee but should not be included in the calculation for the employer contribution to the 403(b) plan.

Nancy

Thanks for getting back to us, @NK-919. Let me direct you to the appropriate contact to assist with your 403(b) contribution matter in QuickBooks Online (QBO).

As the health insurance allowance is added as a pay type, it will be included in the total gross pay during the payroll run. Consequently, it's also included in the 403(b) contribution since you've configured it as six percent of the gross pay.

To ensure the health insurance is not applied to your 403(b) contribution, I recommend seeking advice from a tax specialist regarding alternative methods of recording it in QBO.

Furthermore, I'm providing a list of payroll reports that can offer valuable insights into employee wages, taxes, and contributions whenever needed: Run payroll reports.

Feel free to visit the Community anytime if you require further assistance regarding the 403(b) contribution in QBO. We're here to offer support. Stay safe, and have a wonderful day ahead!

Thanks for your response.  I've spent hours on the phone with QB Online support - with both payroll specialists and tax specialists - and, unfortunately, no one has been able to resolve this issue.  

Nancy