How to Set up and Process Fringe Benefits

The Payroll module can perform the necessary tax calculations and provide reporting for processing taxable, noncash fringe benefits. When the Payroll module is properly set up, taxes are deducted automatically for all fringe benefits reported, and the net pay amount is adjusted. The fringe benefit amounts are properly recorded and reported on employee W-2 Forms. Multiple earnings codes can be set up as fringe benefits, and an automatic deduction code (FB deduction code) is established for the gross amount of all fringe benefits.

Set up a fringe benefit earnings code:

1. Expand Payroll, Setup, Earnings Code Maintenance.
2. Create an earnings code.
3. In the Type of Earnings list, select Fringe.
4. Enter information in all the necessary fields
5. Click Accept

How to Process Fringe Benefits:

1. Expand Payroll, Main, Payroll Data Entry.
2. In the Pay Cycle window, enter all applicable information click OK.
3. Click the Employee No. field lookup, select the employee.
4. Click the Lines tab.
5. Enter the fringe benefits earnings.
   • Note: An offsetting line with deduction code 'FB' is created automatically.
6. Enter the remaining earnings and deductions, as applicable.
7. Click Accept, and continue with Payroll processing.

Defining Fringe Benefit Earnings and Deduction Codes

Earnings codes that are used to record fringe benefits must first be established in Earnings Code Maintenance with the fringe earnings type. The fringe earnings type is used to specify noncash fringe benefits (for example, life insurance or use of company automobile). When an earnings code with the fringe earnings type is entered in Payroll Data Entry, an offsetting line with deduction code FB is created automatically to deduct the Fringe Earnings line amount from the net check amount. Deduction code FB is a permanent record and cannot be deleted. The fringe benefit earnings are added to the gross wages. The fringe benefit information is included in the gross amount and is printed in the box labeled Benefits included in Box 1 on your W-2 Forms.

Fringe Benefits and Employee Maintenance

The Fringe Benefit field in the Federal Tax Summary window in Employee Maintenance is used to display year-to-date fringe benefit amounts (all earnings entered with the fringe earnings type) received by the current employee and reported as taxable income. This field can only be viewed.

Example - Fringe Benefit Deduction Codes

Notes:

• The 'FB' deduction code deducts the Fringe Earning line amount from the net check amount while taxes are deducted automatically, and the net pay amount is adjusted.
• Fringe benefit earnings should be processed with regular pay to properly deduct taxes.
• Fringe benefit earnings are added to the gross wages (included in the gross amount), and printed in the box labeled benefits included in Box 1 on the W-2 forms.
• The Fringe Benefit field in the Federal Tax Summary window of Employee Maintenance is used to display year-to-date fringe benefit amounts (all earnings entered with the fringe type) received by the employee, and reported as taxable income. This field is view-only and cannot be edited.
• If employee has a percentage of gross type of pre-tax deduction (pension or cafeteria) and you do NOT want the Fringe Earnings to calculate into % of gross calculation then you need to enter all regular earnings then apply automatic deductions and then add Fringe earnings code last. When prompted with "Do you want to recalculate deductions?" click No. NOTE: Payroll options must be set to Prompt at the Recalc Deductions in Data Entry field

DocLink: How to populate Box 14 on Payroll W2 forms
DocLink: How to setup options to Recalculate Payroll Deductions