Accounting for health Insurance Contributions and Deduction

Anonymous · ‎September 02, 2020

I file as an S Corp. There are 2 owner-employees and 1 salaried employee paid bi-monthly on the 20th (Day 1-15) and 5th (Previous month Day 16-End of Month). Employer pays half of the employees health insurance (my accountant said it's easier not to account for the half paid by owner-employees paycheck, IE no deductions/contributions on owner-employees' payroll).

I pay for health insurance on the 1st. Employees first payroll for a pay period in that month is on the 20th, which there is an Employee Deduction for half of insurance and a Company Contribution for the other half. On the 5th of the following month, the remaining balances are paid with the payroll for the 2nd half of the previous month.

My P&L current shows the full health insurance premium debit (the actual expense from bank account) under a Health Insurance account. Then under Payroll Expenses, there is a duplicate debit for health insurance (the Company Contribution form payroll).

My Balance sheet shows a positive balance under Payroll Liabilities>Health Insurance, which is an accumulation of the Employee's Deduction from Payroll.

So expense is on its own account in P&L, then each payroll, Company Contributions are accumulating as an additional expense under Payroll Expenses and Employee Deductions are accumulating as Payroll Liabilities.

What should I do? Attached is my "Accounting Preferences" from Settings. Send help. Thanks!

Angelyn_T · ‎September 02, 2020

Hi there, Anonymous.

Allow me to share information about processing payroll and health insurance in QuickBooks Online (QBO).

The employer contribution of the insurance will show up on the Profit and Loss report since this is a company expense. The employee's deduction will then show up on your liability and not on your payroll expenses since this is not a company expense but is coming from the employee's pay.

We can't map insurance items (company contributions) into a liability account. For now, you can use journal entries to move the amount from payroll expenses to the appropriate liability account. I'm adding this article as your reference: Create a journal entry in QuickBooks Online.

You can also skim through the topics from this link for additional guides while working with QuickBooks or payroll in the future.

Let me know if you have any other questions. I'm a few clicks away to help. Have a good day!

Anonymous · ‎January 24, 2021

I understand how to reduce the liability account that is accumulating the Employee Deduction for Payroll Payable for Insurance. I guess I have to do that for the duplicated expenses accounts for the EmployER portion.

DUPLICATING EXPENSE ACCOUNTS

1) Insurance: Health Insurance - Posts the MONTHLY BILL for all employees health insurance. Company is just 1 employee and 2 owners so only 1 employee has a Health Insurance deduction from paycheck. Accountant said not to do that for Officer paychecks.

2) Payroll Expenses: Company Contributions - Posts the EMPLOYER CONTRIBUTION portion to this expense account.

I cannot see how I can change this automatic Company Contribution to post to a liability account. I can only see me doing a monthly reconciliation of making a journal entry to decrease Liability Account for (Liability: Insurance: Company Contributions) and deduction the Insurance Expense account the amount that is shown in the Payroll Expenses: Company Contributions Account.

bainmeister · ‎July 18, 2022

My expense for healthcare is paid at the beginning of the month (health insurance for the month of July is debited from my account on July 1).

My employER expense and employEE deductions accumulate into the health insurance liability account throughout the month. I would rather not leave the expense uncategorized all month long if I dont have to.

I was told that I would have to create and expense at the end of the month choose the category of "health insurance liability" and any remaining difference to be allocated to health insurance expense.

Is there a good way to categorize the health insurance expense when it shows up in the banking tab and just apply the "liability" later as incurred ? I hope this makes sense.

JSEI · ‎December 22, 2023

Put in zero or no contribution in the section under deduction in the employee profile setup.

Under employees there will be a section for "Deductions." Find the deductions that the company is contributing to - ex. Medical Insurance - and there is a section that says "Company Contribution." Change that to "none" or 0.00 or whatever. Then it won't post to the expense account. Then pay your liability check and expense the company portion - no more duplicates. Go back and write off the amounts that have accumulated (duplicated) in the expense account. Look at the transaction journal to see which accounts were affected and essentially do the reverse to stop overstating your expenses. I found this happening in a new job where the previous person had Worker's Comp settings turned on and were duplicating expenses.

I'm using QBOnline Advanced so I don't know the exact settings, but its in the employee profile under their deductions. Hope this helps.

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Accounting for health Insurance Contributions and Deduction