Reimburse your employee

Learn how to add employee reimbursements to employee paychecks in QuickBooks Online Payroll and QuickBooks Desktop Payroll. Reimbursements cover business expenses employees have paid ‌ out-of-pocket and aren't considered taxable income. These payments don't appear on payroll tax forms.

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

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

Step 1: Create a reimbursement item

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

QuickBooks Online Payroll

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Follow this link to complete the steps in product

1. Select your employee.
2. From Pay types, select Start or Edit.
3. Scroll to the Additional pay types section and select Reimbursement.
4. If a reimbursement pay type already exists, you can add another one:
   • Select the dropdown in the Common pay types section.
   • Select + Another Reimbursement type.
5. Enter a default amount or leave it blank to enter the amount when running payroll.
6. Rename the pay type by selecting Edit ✎ next to Reimbursement.
7. Select Save.

QuickBooks Desktop Payroll

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

For accounting purposes, you can update your accounting preferences to make sure the reimbursement amounts post to the correct account in your chart of accounts.

QuickBooks Online Payroll

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Learn how to set up the Payroll accounting preferences for the reimbursement pay type.

QuickBooks Desktop Payroll

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.

QuickBooks Online Payroll

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1. When you create a paycheck, find the Reimbursement field you set up.
2. Enter the amount for the reimbursement.
3. The paycheck total will include the reimbursement amount.

Note: QuickBooks Online Payroll doesn't support "reimbursement only" paycheck as taxes and deductions always impact checks. You'll process reimbursements along with your regular paychecks.

QuickBooks Desktop Payroll

1. Add the reimbursement item to the employee's record:
   • Go to Employees, then select the Employee Center.
   • Double-click the employee's name.
   • Go to the Payroll Info tab.
   • In the Additions, Deductions, and Company Contributions section, select the reimbursement item from the dropdown list.
2. When creating paychecks, find the reimbursement item in the Other Payroll Items area of the Preview Paycheck screen.
3. Enter the amount of the reimbursement on the paycheck.