Payroll: Taxable Benefits

Accounting Procedures - Payroll: Taxable Benefits

As year-end approaches, many employers will discover they have not been calculating withholding for employees who receive taxable benefits. Examples of this can include:

• Use of company car
• Company-paid life insurance exceeding $50,000.

To utilize this feature, activate the TAXBEN paytype and the TAXBENDED deduction in Company Maintenance and then add both definitions to the employee.

It is critically important to activate the TAXBENDED definition so that the taxable benefit only occurs for withholding purposes and is not added to the employee's check.

In the next payroll run, enter a timecard using the TAXBEN pay type.

When Payroll is calculated, it will add this amount to the Gross for tax calculation purposes.

After processing tax withholdings, TAXBENDED is the first deduction to be processed, and will deduct its full amount from the check, thus increasing the gross basis without actually increasing the check amount.

Note: Employee earnings must be sufficient to cover the additional taxes incurred by this method. If Employee earnings are NOT sufficient to cover additional taxes see: Taxable Benefit 0 Check