Reimburse your employee inQuickBooks Desktop Payroll

You can add nontaxable employee reimbursements to paychecks in QuickBooks Desktop Payroll. Reimbursements cover business-related expenses that employees paid out-of-pocket and aren't considered taxable income. These payments don't appear on payroll tax forms.

Note: This article covers nontaxable reimbursements. For taxable reimbursements in QuickBooks Desktop Payroll, see Add fringe benefits to paychecks.

Authoritative guidance

For official guidelines on nontaxable reimbursements, refer to the Employee business expense reimbursements section of IRS Publication 15, Circular E—Employer's Tax Guide.

Step 1: Create a reimbursement item

Add a reimbursement pay type so you can add it to a paycheck.

1. Go to Employees, then select Manage Payroll Items.
2. Select New Payroll Item.
3. Select Custom Setup, then select Next.
4. Select Addition, then select Next.
5. Enter a name for the Reimbursement item (e.g., "Mileage Reimbursement") and select Next.
6. Select an Expense account to track this item.
   • Choose an expense account to track travel or mileage.
   • If the reimbursement is an advance, choose an asset account.
7. Set the Tax Tracking type to None. Select Next.
8. Under Taxes, make sure that none is selected. Select Next.
9. If the reimbursement is based on quantity (like miles/kilometers), select the Based on Quantity checkbox. Select Next.
10. Choose to calculate on Net Pay. Select Next.
11. Enter a Default Rate if applicable, or leave it blank. Select Finish.

Step 2: (Optional) Define accounting preferences

You can change your accounting preferences to make sure reimbursement amounts post to the correct account in your chart of accounts. QuickBooks Desktop Payroll prompts you to select an expense account during item setup.

To review or change the account later:

1. Go to Employees, select Manage Payroll Items, then select View/Edit Payroll Item List.
2. Double-click the reimbursement item you want to review.
3. Select Next until you reach the Expense account screen.
4. Review or change the selected account.
5. Select Next until you can select Finish.

Step 3: Run payroll with a reimbursement amount

Now that you've set up the reimbursement item and checked your accounting preferences, you can add the reimbursement amount to your employee's paycheck.

Add the reimbursement item to the employee's record

1. Go to Employees, then select the Employee Center.
2. Double-click the employee's name.
3. Go to the Payroll Info tab.
4. In the Additions, Deductions, and Company Contributions section, select the reimbursement item from the dropdown list.

Add the amount to the employee’s paycheck

Follow these steps when creating paychecks:

1. Find the reimbursement item in the Other Payroll Items area of the Preview Paycheck screen.
2. Enter the amount of the reimbursement on the paycheck.