An Insightful Accountant reader asked: "The State of New York recently announced requirements for the New York Paid Family Leave Insurance Employee Payroll Deductions. My employer has chosen to go ahead and start offering this deduction even though they're not required until January 2018. How can I set up my QuickBooks Desktop Payroll for both this payroll item and employee deductions for those wanting to begin now?"
While Insightful Accountant doesn't routinely cover payroll-related tax changes involving individual states, the magnitude of this change and the size of the population impacted means this program will potentially affect a significant number of our readers. Because employers are already electing to offer this coverage, we believe it's timely to provide details on how the deduction works within Intuit desktop payroll offerings.
The new Paid Family Leave Program law was enacted in 2016, but does not take affect until Jan. 1, 2018. The program provides employees working within New York with job-protected paid leave. This allows them to care for loved ones without risking their economic security. The program also helps relieve family economic hardships when a wage earner is called into active military service.
The program's specifics have been established by the State and New York has chosen to allow employers and employees to begin voluntarily participating prior to the Jan. 1 (2018) mandatory date. This is more than likely designed to prevent a last minute rush to implement the payroll-related requirements.
Early participation doesn’t mean an employer can simply start taking the deduction out of employee paychecks.
Each employer must go through the state’s process to enroll and set up the insurance plan. To fulfill this requirement, employers should either go to the Tax Agency special Paid Family Leave website or call the agency at 844-337-6306.
From a payroll-processing standpoint, QuickBooks Desktop Payroll recently implemented the necessary changes as a part of the last tax table and payroll program update. If you haven't installed that update, you won't see those changes in your payroll features.
There are several tax ramifications associated with this program. To insure compliance, the most recent payroll update includes a new payroll item (shown below). You'll find a new "Other" tax for New York (NY) is available when an employee is either set up as or changed to New York as their employment state.
New York Fam Leave Deduction - Fig. 01
The NY – Paid Family Leave payroll item (shown below) should automatically populate to the "Other taxes" in the employee's set up window of his Payroll.
New York Family Leave Deduction - Fig 02
The first time you process payroll after the update, a new pop up window will appear asking you to confirm if the new payroll deduction will affect your unemployment rate.
New York Family Leave Deduct - Fig 03
The QuickBooks Payroll team advises you should select "No." (Note, this may change in the future once the state program is fully implemented.)
Beginning with the next payroll processed for an employee, the deduction will be computed at New York’s established rate, which is presently 0.126 percent on wages up to $1305.92 per week. The current annual maximum deduction is $85.57.
This new deduction is not set up for automatic remittance, Intuit will not (at least at present) be handling any remittance advice, payments or reporting related to this payroll item, regardless of your QuickBooks Desktop Payroll plan. Employers will be required to report and remit payment in accordance with the provisions of their enrolled insurance plan.
All amounts deducted from employee paychecks for this item will be reported in Box-14 on their W-2 at the end of the respective tax year.