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L59
Level 1

I need to generate a bonus that has no tax deducted from it. How would I do this?

I need to generate a bonus cheque for one of my employee's that is to be issued tax free.  I have a Request to Reduce Tax Deductions at Source form for CRA and the amount is going directly to a RRSP.  How do I generate this bonus cheque.

Solved
Best answer March 11, 2019

Best Answers
IntuitSharon
Level 3

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hello, Laurel!

You can use the Reimbursement pay type to pay an employee without withholding taxes. Here's how to to do this:

  1. In the left navigation bar, click Employees.
  2. Click the employee's name and hit Edit employee.
  3. Under How much do you pay this employee? click Add additional pay types if you haven't selected any other pay types, or click the pencil icon if you have .
  4. Check the box next to Reimbursement.
  5. You can edit the description that appears on the cheque by clicking the pencil icon.
  6. Click Done.

When you run payroll, you'll have an additional box for the new pay type. Any amount entered in that box will not be taxed.

However, you mentioned that the funds will be sent to a Registered Retirement Savings Plan. If so, you might want to consider adding a deduction to the cheque so the money isn't recorded as going directly to the employee.

When you run payroll, enter the the full, non-taxable amount in the Reimbursement box, then enter the same amount for the deduction. This will create a net zero cheque, and the funds will be held in a liability account.

When you pay the RRSP, you can record the expense against the liability account to balance your books. If you're not sure whether you should use the deduction, I recommend contacting an accountant.

You can find instructions here for how to set up a deduction: https://community.intuit.com/articles/1433855-set-up-employee-deductions-and-company-contributions.

For more information on which pay types are taxable, check out this article: https://community.intuit.com/articles/1278212-payroll-taxability-of-deductions-and-pay-types-canada-....

Feel free to reach out to me if you have more questions!

Sharon

View solution in original post

7 Comments 7
IntuitSharon
Level 3

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hello, Laurel!

You can use the Reimbursement pay type to pay an employee without withholding taxes. Here's how to to do this:

  1. In the left navigation bar, click Employees.
  2. Click the employee's name and hit Edit employee.
  3. Under How much do you pay this employee? click Add additional pay types if you haven't selected any other pay types, or click the pencil icon if you have .
  4. Check the box next to Reimbursement.
  5. You can edit the description that appears on the cheque by clicking the pencil icon.
  6. Click Done.

When you run payroll, you'll have an additional box for the new pay type. Any amount entered in that box will not be taxed.

However, you mentioned that the funds will be sent to a Registered Retirement Savings Plan. If so, you might want to consider adding a deduction to the cheque so the money isn't recorded as going directly to the employee.

When you run payroll, enter the the full, non-taxable amount in the Reimbursement box, then enter the same amount for the deduction. This will create a net zero cheque, and the funds will be held in a liability account.

When you pay the RRSP, you can record the expense against the liability account to balance your books. If you're not sure whether you should use the deduction, I recommend contacting an accountant.

You can find instructions here for how to set up a deduction: https://community.intuit.com/articles/1433855-set-up-employee-deductions-and-company-contributions.

For more information on which pay types are taxable, check out this article: https://community.intuit.com/articles/1278212-payroll-taxability-of-deductions-and-pay-types-canada-....

Feel free to reach out to me if you have more questions!

Sharon

View solution in original post

sdtaylor58
Level 1

I need to generate a bonus that has no tax deducted from it. How would I do this?

When I submit payroll why is it not generated to my reconciliation

LauraAB
QuickBooks Team

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hello sdtaylor58,

 

It's great to hear that you're using QuickBooks Online with one of the Payroll modules! I love that you've chosen our products to help manage your business's books, and it's important to me that you have a clear sense of what's going on when you're using the features. I'll get you started.

 

When you run payroll in QuickBooks Online, it creates the related transactions in your chart of accounts. If you're not sure where your payroll transactions are mapping to, you can check out the account setup for payroll by following these steps.

 

Account mapping for Standard Payroll

  1. Select the Gear icon.
  2. Choose Payroll settings.
  3. Click Accounting under the Preferences heading.

Account mapping for Advanced Payroll

  1. Select the Gear icon.
  2. Choose Advanced Payroll settings.
  3. Click Chart of Accounts from the left menu.

One of the reasons your transactions might not be appearing in your reconciliation is if you don't have the chequing account set up for your bank account. For instance, in Standard Payroll, the program will create a "Payroll Wages" chequing account for you, and you'd need to go in and change that account to have it go to the one you need.

 

If that's what's happened here, there are two ways to fix this.

  1. Use a journal entry or the transfer feature to move the funds from one account to the proper one (Note: You can do one lump sum or multiple transactions in order to make sure the dates are correct for the transactions).
  2. Merge the current account where the wages are to the bank account you need (Note: Only do this if there aren't other transactions in the current account that you wouldn't want to be in the bank account).

To get a hand with these options or to troubleshoot further if what I've gone over isn't the case for your account, contact support using one of the following options.

 

Schedule a Callback or Chat: click (?)Help in the upper right > click Contact Us > explain your situation > click Let's Talk > choose Get a callback or Start a Chat

Social MediaFacebookTwitter, and Instagram

 

All the best to you!

sbradford
Level 1

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hello,

 

I'm wanting to do the same and pay a bonus with no taxes deducted since the employee is putting the entire bonus amount to RRSPs. 

 

If i were to pay using the reimbursement payroll option - I don't think the payment will register on the employees T4 based. How do I pay a bonus with no taxes deducted and have it register on their T4? 

Rebecca R
QuickBooks Team

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hello sbradford,

 

Welcome to the QuickBooks Community. Choosing the correct pay type for your employee's bonus is important, and QuickBooks Online is equipped with a variety of pay types to meet your business' needs. Let me give you a hand with this.

 

Since you've indicated that your employee will be putting the bonus towards their RRSP, the only way that it will not be taxed is by using the Reimbursement pay type, or by paying it directly into the employee's RRSP on their behalf. If it needs to be recorded on their T4, and the reimbursement pay type doesn't allow for that, it would be best to pay into their RRSP directly. You can consult with the CRA for more on how to do that if you're unfamiliar.

 

If your employee is insistent on paying it towards their RRSP themselves, the only other option would be to add it to their pay as a regular bonus pay type, and run payroll. Afterwards, you can reach out to our team of Payroll experts who can then assist you with making a pay edit in order to remove the taxes that are taken out. This'll only work if you're paying your employee by cheque.

 

I'd love it if you'd submit some feedback on this to our product development team. They want to hear what features or improvements you'd like to see made to QuickBooks, and it seems as though you would benefit from a non-taxable bonus pay type option. To have your voice heard, use the Gear icon, then select Feedback.

 

Here are the ways that you can reach out to support:

 

Phone: Call us at 1-855-253-1536 from Monday to Friday between the hours of 9 AM and 8 PM EST.
Schedule a Callback or start a Chat: click (?)Help in the upper right > type and enter "Contact support" into the QB Assistant > click Contact Us > explain your situation > click Let's Talk > choose Get a callback or Start a Chat
Social MediaFacebookTwitter, and Instagram.

 

I wish you the best of luck. Enjoy your Monday!

BLW604
Level 1

I need to generate a bonus that has no tax deducted from it. How would I do this?

How do you record the payment when you pay it directly to the RRSP on behalf of the employee?

Nick K
QuickBooks Team

I need to generate a bonus that has no tax deducted from it. How would I do this?

Hi BLW604.

 

Setting up the RRSP your company pays on behalf of your employee is imperative to keep your books correct and track the RRSP payments. I'd be happy to help you with getting this tracked.

 

In order to track the RRSP in QuickBooks Online you'll need to follow these steps:

 

  1. Click on the Employees tab. 
  2. Select the employee.
  3. Depending on your payroll setup, you'll either click on the pencil icon next to Pay, or you''ll need to click on the pencil icon next to #5 Does [employee name] have any deductions?
  4. Select Retirement Plans from the first drop-box menu. 
  5. Select Registered Retirement Savings Plan
  6. Fill out the questionnaire, and be sure to include the Employee deduction and the Company-paid contribution.

From there you can record the payments when you pay your payroll liabilities. Should you have further questions about this you can also check out this Community thread or reach back out and we'd be happy to help.

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