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Intuit
17 helpful votes

Add fringe benefits to paychecks

Learn how to add fringe benefits to paychecks in Online Payroll.

Many employers offer fringe benefits to employees for a variety of reasons. We explain what fringe benefits are how to add them to a paycheck, and more.

What is a fringe benefit?

A fringe benefit is a type of employee compensation that has special payroll reporting requirements. Fringe benefits range from: cash, like clergy housing, allowance, or non cash benefits such as allowing an employee personal use of a company car, group term life insurance or S Corp health benefits. The table below shows the types of benefits that we support.

Cash Fringe Benefits                                                                                             Increases Net Pay? Other Information                                                                       
Allowance Yes Taxes as regular wages
Non-taxable Per Diem Yes Reported on form W-2 Box 12 Code L.
Clergy Housing (Cash) Yes Reported on Form W-2 Box 14
Clergy Housing (in-Kind) No Reported on Form W-2 Box 14
Group Term Life Insurance (GTLI) No Taxable. Added to wages reported on form W-2. Appears in box 12 Code C
Personal User of Company Car (PUCC) No Taxed as regular wages. Reported on form W-2 box 14
S-Corp Owners Health Insurance No Subject to federal and state withholding (income) taxes. Reported on form W-2 box 14
Company HSA Contribution No Taxable in some states, Reported on from W-2 box 12 code W

Note about Group Term Life Insurance (GTLI) and Personal Use of Company Car (PUCC) on Tax and Wage Summary reports:GTLI and PUCC amounts will not create additional tax withholding when included on paychecks, but will be reported as taxable wages on tax forms, such as Form W-2. Because of this, these amounts will appear as "Excess Wages" for Federal and State income tax on the Tax and Wage Summary report. These are not true "Excess Wages". Please refer to the "Total Wages" column for the total taxable wages.

Add Fringe Benefits to your pay types

Before adding or reporting a fringe benefit on a paycheck, you need to enable the fringe benefit inside the employee profile.

Choose your product to see the steps to enable the fringe benefit item.

Intuit Online Payroll and Intuit Full Service Payroll

  1. Select the Employees tab.
  2. Select the employee's name.
  3. Select Edit in the Pay section.
  4. Select Show all pay types.Additional pay types in QuickBooks Payroll
  5. Select all relevant fringe benefits.
  6. Select OK.
  • You can enter a recurring amount for Fringe Benefits when the value is reported every pay period.

Company HSA contribution fringe benefit in QuickBooks Payroll

QuickBooks Online Payroll

  1. In the navigational bar, select Workers.
  2. Select employee's name.
  3. Select the pencil ✎ icon next to the Pay section.
  4. Under Step 3, How much do you pay this employee, select + Add additional pay types (like overtime, sick, and vacation pay) .
  5. Select Even more way to pay this employee.Even more ways to pay fringe benefits in QuickBooks Payroll
  6. Select all relevant fringe benefits.
  7. Select Done.

Enter a value of a fringe benefit on a paycheck

Use or contribution of a fringe benefit must be reported on a paycheck. This will ensure that the W-2 is correct at the end of the year. Choose your product to see the steps on adding the fringe benefit to a paycheck.

Intuit Online Payroll

  1. Be sure the Fringe Benefit pay type has already been applied to the employee.
  2. Select the Payday tab.
  3. Under Enter Compensation, select the employees to pay.
  4. Enter the employee's regular pay and the amount of the fringe benefit in the fringe benefit field you previously added.
  5. Create and Approve the payroll.

Intuit Full Service Payroll

  1. Be sure the Fringe Benefit pay type has already been applied to the employee.
  2. Select the Payday tab.
  3. Under Enter Compensation, select the employees to pay.
  4. Enter the employee's regular pay and the amount of the fringe benefit in the fringe benefit field you previously added.Enter fringe benefit compensation in QuickBooks
  5. Select Preview Payroll.
  6. Review the payroll by selecting on each employee s net pay, or by reviewing the Preview Payroll Details report.Preview fringe benefits payroll in QuickBooks
  7. Select Submit to Intuit.

QuickBooks Online Payroll and QuickBooks Full Service Payroll

  1. Be sure the Fringe Benefit pay type has already been applied to the employee.
  2. From the left menu, select Workers.
  3. Select Run Payroll.
  4. Enter the employee's regular pay and the amount of the fringe benefit in the fringe benefit field you previously added.
  5. Preview and Submit the payroll.

Enter a fringe benefit adjustment

If you've already paid the last payroll of the year, you can no longer add fringe benefits to a paycheck, you must enter an adjustment. Please note, income tax withholding is applied differently on checks vs. adjustments for fringe benefits.

Choose your product to see the steps on adding a fringe adjustment.

Intuit Online Payroll

  1. Select the Payday tab.
  2. From the Check Type drop-down, select Fringe Adjustment.
  3. Select Go.
  4. If you will pay the employee's taxes on the benefit value, select the box.
  5. Change the Adjustment Date if necessary.
  6. Select the box next to the employee name for the adjustment and enter the value of the benefit. (You can create adjustments for more than one employee at a time; just select the boxes next to their names.)
  7. Select Create.
  8. If this is the end of a quarter, don't forget to make your final tax payments and file forms.

QuickBooks Online Payroll

If you've already paid the last payroll of the year, you can no longer add fringe benefits to a paycheck, you must enter an adjustment.

Income tax withholding is applied differently on checks vs. adjustments for fringe benefits.

To enter a fringe benefit adjustment
  1. Select Workers, then Employees.
  2. From the Run Payroll drop-down, select Fringe benefits only.
  3. Select Yes, my business will pay the taxes  or No, my employee will pay the taxes
  4. Change the Adjustment Date if necessary.
  5. Select the box next to the employee name for the adjustment and enter the value of the benefit. (You can create adjustments for more than one employee at a time; just select the boxes next to their names.)
  6. Select Preview Payroll.
  7. Review Fringe Adjustment, Select Submit Payroll at the bottom right corner
  8. If this is the end of a quarter, don't forget to make your final tax payments and file forms.

Intuit Full Service Payroll or QuickBooks Full Service Payroll

Contact Payroll Support so an agent can create this adjustment for you. From within your account, select Contact Us.

Gross up for taxes on a fringe benefit adjustment transaction

Since a fringe benefit is taxable and usually non cash, sometimes adding a large amount to a fringe item will cause a paycheck's net pay to cross over into the negative. Making the check unable to be processed.

Choose your product to see a list of ways to prevent this:

Intuit Online Payroll or QuickBooks Online Payroll

Fringe benefits normally cause the net pay on a regular paycheck to be reduced by the amount of employee paid taxes. If you process a separate check for the fringe benefit, you may not have any wages to cover the taxes. You therefore have 2 options:

  1. If the employee will receive another paycheck in the future, you can deduct the taxes later.
  2. Your company may pay the tax for the employee, by "grossing up" the paycheck. This means your company pays more taxes in the long run.

If you choose option 1, do not check the I will pay the employee's taxes box when creating the adjustment. Since we will record the amount of employee tax as a loan, you will need to enter a repayment amount as an Employee Tax Loan deduction on subsequent paychecks to recover the funds from the employee.

If you choose option 2, check I will pay the employee's taxes box when creating the adjustment. We will increase the payroll taxes for you so that you, the employer, pay the taxes out of pocket on the employee's behalf. Notes:

  • You only have the option to pay the employee's taxes on Group Term Life Insurance or on Personal Use of Company Car. We do not support gross up with respect to S Corporation Owner Health Benefits, which are subject only to income tax withholding.
  • If you pay fringe benefits, be sure to review your Workers Compensation Insurance. In some cases, part or all of fringe benefits or employee taxes paid by the employer may be subject to Workers Compensation Insurance.

Intuit Full Service Payroll or QuickBooks Full Service Payroll

Generally speaking, fringe benefits increase the amount of payroll taxes owed by employees. If you include fringe benefits on a regular paycheck, we reduce the net pay by the amount of the payroll taxes owed. If, however, you process fringe benefits separately from your payroll (through a fringe benefit adjustment), there is no pay available to cover the employee s taxes on the fringe benefits.

You therefore have 2 options:

  1. You may collect the employee's taxes from the employee (for example, by deducting the amount from future paychecks). This does not change the amount of taxes paid by you or your employee. It will reduce the employee's net pay, however, when you collect the taxes.
  2. You may pay the employee's taxes yourself, by increasing the amount of payroll taxes paid by your business. This is sometimes called "grossing up for taxes." It means that you, the employer, will pay more payroll taxes overall. But you might have to do this if your employee no longer works for you, or, if you do not want your employee to have to pay taxes on the fringe benefit.

If you choose option 1, we'll record the amount of the employee's taxes as a loan. If you want, you can collect the amount of the loan from your employee's subsequent paychecks.

If you choose option 2, we'll  increase the payroll taxes for you accordingly.

Please note: The tax amounts you pay for your employee are themselves subject to payroll tax.

Notes:

  • You only have the option to pay the employee's taxes on Group Term Life Insurance or on Personal Use of Company Car. Intuit Full Service Payroll does not support gross up with respect to S Corporation Owner Health Benefits, which are subject only to income tax withholding.
  • If you pay fringe benefits, be sure to review your Workers Compensation Insurance. In some cases, part or all of fringe benefits or employee taxes paid by the employer may be subject to Workers Compensation Insurance.

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