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Reimburse your employee in QuickBooks Payroll

by Intuit•67• Updated 2 weeks ago

Learn about reimbursements and how to pay your employee back for out-of-pocket expenses in QuickBooks Payroll.

Reimbursements are non-taxable payments you pay to your employees if they've paid business expenses out of their own pockets. This type of payment doesn’t appear on any of your payroll tax forms. For guidelines on reimbursements, check the Employee business expense reimbursements section of IRS Publication 15, Circular E — Employer's Tax Guide.

If you have QuickBooks Desktop Payroll, you can create a taxable reimbursement item, see Add fringe benefits to paychecks.

We’ll show you how to reimburse your employees in your payroll product.

Note: Not sure which payroll service you have? Here's how to find your payroll service.

Reimburse your employee

Step 1: Create a reimbursement item

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  1. Go to Payroll, then Employees.
  2. Select your employee.
  3. From Pay types, select Start or Edit.
  4. Scroll to the Additional pay types section and select Reimbursement.
    • If there's an existing reimbursement pay type, you can add a new one in the Common pay types section dropdown. Just select + Another Reimbursement type to add new.
    • You can add the default amount or leave it blank, and just enter the amount as you run payroll.
    • You can also rename this pay type. To rename, select Edit ✎ next to Reimbursement.
  5. When you’re finished, select Save.
  1. Go to Employees, select Manage Payroll Items.
  2. Select New Payroll Item.
  3. Select Custom Setup, then select Next.
  4. Select Addition, then select Next.
  5. Enter the name of the Reimbursement item. Select Next.
  6. Select an expense account for tracking this item.
    1. Select an expense account to track travel or mileage amounts. 
    2. If this will be an advance to the employee, choose an asset account.
  7. Set the Tax Tracking type to None. Then select Next.
  8. Under Taxes, none should be selected. Select Next.
  9. For amounts paid per mile/kilometer, select the Based on Quantity checkbox. Then select Next.
  10. Choose to calculate on Net Pay. Then select Next.
  11. Enter a Default Rate. Then 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.

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

In QuickBooks Desktop Payroll, you're asked to select an expense account while setting up the payroll item. If you want to make sure or change your account:

  1. Go to Employees, select Manage Payroll Items then select View/Edit Payroll Item List.
  2. Open the payroll item you’d like to review.
  3. Select Next until you get to the Expense account.
  4. Review or make changes, then select Next until you can select Finish.

Step 3: Run payroll with a reimbursement amount

Now that you’ve added the reimbursement pay type and updated the accounting preference, you’re ready to reimburse your employee. 

For a better experience, open this article in QuickBooks Online. Launch side-by-side view Open this link in a new window

When you create a paycheck, enter an amount in the Reimbursement field. The check includes the reimbursement amount in the total.

Add the reimbursement item to your 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. Add the item from the dropdown list under Additions, Deductions, and Company Contributions.

When creating paychecks, the reimbursement item will appear in the Other Payroll Items area of the Preview Paycheck screen. Enter the amount of the reimbursement on the paycheck. 

QuickBooks Desktop Payroll AssistedQuickBooks Desktop Payroll BasicQuickBooks Desktop Payroll EnhancedQuickBooks Desktop Payroll StandardQuickBooks Online Payroll CoreQuickBooks Online Payroll EliteQuickBooks Online Payroll Premium

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