Solution Properties
Solution ID:
222924850024123
Last Modified Date:
Mon Jul 06 22:14:58 UTC 2026
Taxonomy Path:
Category//Setup and configuration//Users//Preferences
Author:
LegacyAuthorUS
How to Set up and Process Fringe Benefits
Description
Cause
The Payroll module performs the required tax calculations and provides reporting for taxable, noncash fringe benefits.
When you set up the Payroll module correctly, the system deducts taxes automatically for all reported fringe benefits and adjusts the net pay amount.
The system records and reports fringe benefit amounts on employee W-2 forms.
You can set up multiple earnings codes as fringe benefits. 
Resolution

Set up a fringe benefit earnings code

  1. Open Payroll, Setup, Earnings Code Maintenance.
  2. Click to create a new earnings code.
  3. Select Fringe from the Type of Earnings list.
  4. Enter all the required information fields.
  5. Click Accept to save the earnings code.

Process fringe benefits in payroll

  1. Open Payroll, Main, Payroll Data Entry.
  2. Enter all the required information in the Pay Cycle window, then click OK.
  3. Use the Employee No. lookup, and select the employee.
  4. Select the Lines tab.
  5. Enter the fringe benefit earnings line.
  6. Confirm the system creates an offsetting deduction line with the code FB.
  7. Enter remaining earnings and deductions as needed.
  8. Click Accept, then continue payroll processing.

Understand fringe benefit earnings and deduction codes

Fringe benefit earnings codes record noncash benefits, such as life insurance or company vehicle use.
When you enter a fringe earnings code:
  • The system creates an automatic deduction line using the code FB.
  • The FB deduction offsets the fringe earnings from the net amount of the paycheck.
  • The system adds fringe earnings to gross wages.
  • Payroll calculates taxes automatically on the gross amount.
The system keeps the FB deduction code permanent and doesn’t allow deletion.
Fringe benefit amounts:
  • Increase gross wages.
  • Included in Box 1 on W-2 Forms.

Review fringe benefit totals in employee records

Use the Federal Tax Summary window in Employee Maintenance to view the totals.
  • The Fringe Benefit field shows year-to-date fringe earnings.
  • The system includes all earnings entered with the fringe type.
  • The system lets you view the field but doesn’t allow edits.

Example of fringe benefit processing

Example: The Earnings code MI tracks personal mileage for a company vehicle.
  • You enter the MI earnings code in Payroll Data Entry.
  • The system creates an automatic FB deduction for the same amount.
  • The deduction prevents the amount from increasing the net check.
This process ensures:
  • Payroll reports fringe benefits as gross earnings.
  • The system calculates taxes correctly on regular pay.
  • W-2 Forms include the benefits in Box 1.

Important processing notes

  • The FB deduction removes fringe earnings from the net amount. 
  • The system calculates taxes automatically on fringe benefits.
  • You must process fringe benefits with regular payroll for accurate taxes.
  • The system includes fringe earnings in gross wages and W-2 reporting.
  • If an employee uses a percentage-of-gross pre-tax deduction:
    1. Enter all regular earnings first.
    2. Enter automatic deductions.
    3. Enter fringe earnings last.
    4. When prompted to recalculate deductions, select No.

NOTE:

Enable the Prompt option in the Recalculate  Deductions in Data Entry setting

 

 

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Steps to duplicate
Related Solutions

How to populate Box 14 on Payroll W-2 forms
How to set up options to Recalculate Payroll Deductions