Solution Properties
Solution ID:
230609184358197
Last Modified Date:
Mon Dec 16 21:15:18 UTC 2024
Taxonomy Path:
Category//Setup and configuration
Author:
[email protected]
Record a taxable fringe benefit as a lump sum at year end
Description
Cause
Resolution

 TIP: To print the expanded sections, use the Print to PDF option Print to PDF symbol. 

Before you begin

  • Consult your Tax Advisor for the taxable status of the fringe benefit. Sage analysts are unable to assist with tax advice
  • Follow all steps below to ensure your W-2, quarterly and annual tax reporting is accurate

1. Set up a taxable deduction for the fringe benefit amount

  1. PR, Utilities, Maintain Deductions.
  2. Click the New button to create your new deduction.
  3. Enter a deduction ID and Description. 
  4. Method - Variable, entered on time card.
  5. Category - Company-Ind. 
  6. Enter the desired General Ledger accounts for the Credit account and Debit account. 
  7. Active - select the From option. Enter the active date to include the computer date that you’re processing the check. 
     NOTE: Active dates use the computer date and not the check posting date.
  8. Select the appropriate taxable fields for the deduction.  CAUTION: Select FWT and SWT taxable if the deduction must report in Box 1 and Box 16 of the W-2.
  9. Click the 'W-2...' button.
  10. In the Box number to use field specify the W-2 box for this fringe benefit. For example, Box 12 and the appropriate ID to use.
  11. Save.
  12. The screenshot below is an example only.
    Maintain Deductions task. Example of how to set up the fringe benefit deduction.

2. Set up an Other Pay to record the employee taxable income

  1. PR, Utilities, Maintain Other Pays.
  2. Click the New button to create a new Other Pay.
  3. Enter the Other Pay ID and Description.
  4. Method - Variable, entered on time card.
  5. Category - Individual.
  6. Define the General Ledger account for the Debit account.  Consult your CPA as which accounts to use.
  7. Select Add to gross and clear all the taxable check boxes.
     NOTE: Select Add to gross for tax reporting to be correct. 
  8. Active - select the From option. Enter the active date to include the computer date that you’re processing the check.
  9. Save.
  10. The screenshot below is an example only.
    Maintain Other Pay task. Example of how to set up the fringe benefit other pay.

3. Add the Deduction and Other Pay to the employee record

  1. PR, Employees, Maintain Employees.
  2. Click the Deductions... button and assign the deduction.
    Maintain Employee Deductions screen. Add fringe benefit deduction to employee record.
  3. Click the Other Pays... button and assign the other pay.
    Maintain Employee Other Pays screen. Add fringe benefit other pay to employee record.

4. Process the time card to record the fringe benefit

  1. Select PR, Processing, Time Card Entry. 
  2. Click the Ded/Other pays button and deselect any active deductions or other pays. This check is for processing the fringe benefit only. 
  3. In Earnings, select the fringe benefit Deduction.
  4. Enter the amount of the fringe benefit in the Gross Pay field.
  5. Save.
  6. The example below is a fringe benefit for 5000.00.
    Time card entry window. Adding the fringe benefit deduction to the timecard.

5. Calculate, Post and Print the payroll check

  1. PR, Processing, Automatic Payroll Calculation.
  2. Calculate the payroll for the employees.
  3. OK the message "One or more employees has checks with a negative balance...".
  4. Review the Payroll Register for accuracy.
  5. PR, Processing, Manual Payroll Calculation.
  6. When prompted to use the calculated check information, select Yes.
  7. Click Fed/State taxes... Zero the FWT and SWT amounts and OK to save the change.
    Manual Payroll Calculation. Zero out the FWT and SWT employee amounts.
  8. Make note of the negative net amount showing.  This is the Employee/Employer OASDI and Medicare and any other mandatory taxes withheld.
    Manual Payroll Calculation window. Note the negative net pay amount.
  9. Click Ded/Other pays... Enter the negative net amount in the Other Pay.
    Manual Payroll Calculation Deductions/Other Pays. Add the negative amount of taxes to the Other Pay.
  10. Click OK and save the record. The new net pay amount for the check is now zero.
    Manual Payroll Calculation. Net Pay shows zero.
  11. "OK to post this zero amount check?" click Yes.
  12. Save.
  13. Select PR, Processing Print Payroll Checks, and print the checks.

 

W-2, Form 941, and Form 940

▼ Form W-2
  • The fringe benefit will show in Box 1 along with the OASDI and Medicare calculated
  • The employer will be responsible to pay the tax liability to the government agency
  • The employee will be responsible to pay the FWT and SWT taxes on their income tax return
  • Make arrangements with the employee if you wish reimbursement of the employee portion of OASDI and Medicare
    The example below is for a $5,000.00 fringe benefit

Form W-2. Fringe benefit amount reports in Box 1.

▼ Form 941
  • The Form 941 quarterly report shows the fringe benefit in Box 2, 5a and 5c
  • The employer is responsible for paying the tax liability to the government agency
  • The employee will be responsible to pay the FWT and SWT taxes on their income tax return
  • Make an arrangement with the employee if you wish reimbursement for the employee portion of OASDI and Medicare
    The example below is for a $5,000.00 fringe benefit

Form 941 reporting for the fringe benefit.

▼ Form 940
  • The Form 940 will show a negative amount in Box 4
  • This is by design due to the company paid deduction being taxable for FUTA
  • Edit the form by zeroing out the amount in Box 4 and adding to Box 3

BEFORE:                                                                                           AFTER:
Form 940 shows negative amount in Box 4.Form 940. Zero out the amount in Box 4 and add to the amount in Box 1.

 

 

 

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