Insur Deduct Options
Options for setting up Payroll Deductions in QuickBooks.
When you setup a Payroll Item to track reimbursable activities for an employee (e.g. health insurance deductions for the "employee's share" of premiums paid) you have two choices:
1) You can associate the Payroll Item (deduction) with an Other Current Liability type account. This option creates a Payroll Liability for the Health Insurance provider that you will pay just as you pay the liabilities you owe for state and federal payroll-related taxes. (By default, QuickBooks will assign this Payroll Item to the QuickBooks-created "Payroll Liabilities" account to be tracked by payroll item based reports.)
2) You can option to associate the Payroll Item (deduction) with an Expense type account (or Cost type). With this option you can still include the deduction on the employee’s paycheck and even set the deduction to be a default amount or percentage; however, the deduction from the employee’s paycheck will reduce Expenses rather than increase liabilities. No entry shows in the Pay Payroll Liabilities window or the Payroll Liabilities report. No subsequent entry is required. The process under this option would be:
- Pay both the employees’ and company’s portions of health care to your health insurance provider. Code the bill/check to “Health Insurance Expense.” For this example, let’s assume that the check is for $1,500 and that $750 is to be reimbursed by employees and $750 is for the company portion. At this point the expense account will show a total expense of $1,500.
- Process payroll and deduct the correct amount from each employee’s paycheck using a deduction Payroll Item that posts to (credits) “Health Insurance Expense.” For this example, the total health insurance deductions for all employees combined is $750.
- Review the Health Insurance Expense account to make sure the balance in Health Insurance expense is $750. The company paid $1,500 and then the employees reimbursed the company $750, so the actual Health Insurance Expense is $750.00.
Note: If you track payroll costs/expenses to Jobs (or in some cases even to classes) you may prefer to continue processing the employee deductions through Paychecks and paying them with Payroll Liability Payments. If you do, the company portion will post to the jobs and/or classes that appear on the Paycheck (e.g. that you enter on the Paycheck or import into the Paycheck from timesheet detail.
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