How do I enter taxable automobile, life, health insurance or other benefit allowances so that they appear as part of the W-2 or T4 form?

You can use a taxable In/Out pay to add to an employee's taxable and subject to earnings. Automobile mileage, Vehicle or Travel allowances and health allowance plans (Owner, Officers, SCORP) are the more common uses of this type of pay, sometimes referred to as deferred compensation or imputed income. When you use an In/Out pay, the pay is taxed and then reduced by the pay amount with a corresponding deduction. You can enter the In/Out pay in addition to other types of pay on a regular check or you can enter the In/Out pay on a separate check to create a zero amount check.

 

Set up an In/Out pay:

1. Go to Payroll, Setup, Pays.
2. Type a new Pay ID and Description.
3. Select Other as the Pay type and then select the In/Out check box.
   Note: Not all set up selections are required to use this type of pay. Review the set up for the pay and deduction to make customized selections. For example, specify GL accounts.
4. Enter the applicable information for Printed desc, Distribute to, Expense account, and JC category.
   Note: When marking the applications for which this pay should create entries, if Distribute to JC is not marked, Distribute to BL is not available.
5. Select any applicable Employee taxes exempt or Employer taxes exempt for tax types not applicable to this pay.
6. Click Deduct and then type the description.
   Note: Deduct will not show up immediately after checking In/Out you must select a different field after or press Save, you will receive an error message and be prompted to fill in the Deduct settings.
7. Click OK, click Save, and then click Close.
8. Enter a check. There are three options available below to process a check with the in/out pay:
   1. Process an In/Out pay with other earnings when the employee pays the tax
   2. Issue a zero amount check and have the employer pays the taxes
   3. Issue a zero amount check where the employee pays the taxes

Tip: When you enter a zero amount check in Payroll, be aware of the following considerations:

• Checks that amount to zero are still processed when using Process Payroll.
• Checks with a zero check amount print as a voided check during Print Checks. If a zero net check is created to correct an employee's earnings, taxes, deductions, or fringes, you may want to enter a manual check date and manual check number to avoid printing the check as a voided check.
• Checks with a check amount of zero with direct deposit deductions do not print during Print Checks, however, a direct deposit notification form or stub does print during Generate Direct Deposits.
• Earnings information from any check with a zero check amount is posted as usual to the employee when using Post Checks.

 

Enter the In/Out pay with other earnings when the employee pays the tax:

1. Enter a line of time with the In/Out Pay ID and the appropriate amount.
2. Process the check as usual. The effects are as follows:
   • The taxable earnings are increased by the amount of the In/Out pay
   • The In/Out pay amount washes out by the In/Out deduction
   • The amount of the employee taxes increases by the amount of the taxes incurred on the In/Out Pay amount

A zero amount check when the employer pays the tax:

Note: You will use a reimbursement pay for this solution. If you do not have a reimbursement pay set up, select the attachment below for details on how to create a reimbursement pay.

1. Enter the In/Out pay amount in Enter Checks. For instructions on how to use Enter Checks, select the link below. Do not enter any other earnings.
2. Click Process, select any calculation frequencies, and then click OK.
3. A message appears. Because there are no actual earnings, this creates a negative check. Click OK.
   Note: This increases the taxable earnings by the amount of the In/Out pay. The In/Out pay amount washes out by the In/Out deduction.
4. Click Check Info and verify that the employee tax amounts increase by the amount of the taxes incurred on the In/Out pay amount. Make note of that amount, then click OK.
5. Enter a Reimbursement type pay for the amount noted in step 4 and then process the check.
6. Click Check Info and verify that a zero amount check results. Then click OK.
7. Click Accept Check and then click Finish.

A zero amount check when the employee pays the tax:

Note: If you zero out the taxes in step 5 below, keep in mind that required taxes like SOC and MED need to be paid. If this is the employee's last check for the current year, your FICA employee taxes will report as underpaid. Consult a certified tax advisor.

1. Enter the In/Out pay amount in Enter Checks. For instructions on how to use Enter Checks, select the link below. Do not enter any other earnings.
2. Click Process, select the calculation frequencies, and then click OK.
3. A message appears. Because there are no actual earnings, this creates a negative check. Click OK.
   Note: This increases the taxable earnings by the amount of the In/Out pay. The In/Out pay amount washes out by the In/Out deduction.
4. Click Check Info and verify that the employee tax amounts increase by the amount of the taxes incurred on the In/Out amount.
5. Enter the amount of the net pay as a negative loan deduction.