In this article, we will be discussing about how to create taxable fringe benefits payroll items and providing you a full process along with its workflow. Sometimes, you may have to add fringe benefits for your employees. If you also need to do this, this article can be helpful for you as we will be explaining you about the benefits of fringe payroll items. You can also contact us at our QuickBooks Payroll Support Phone Number +1800-567-0425 to get detailed assistance for this topic.
What Is A Fringe Benefit?
A fringe benefit is a type form that you to use pay for the performance of services, provided by the employer to employee. For example, Personal Use of a Company Car (PUCC), that lets your employee to use a business vehicle for personal use, is a type of fringe benefit.
Non-cash fringe benefits needs to get reported on a paycheck where the employee has regular wages to offset the taxes on the fringe benefit items.
Are Fringe Benefits Taxable?
Any fringe benefit provided by you comes under the tax scheme and you need to add in the recipient’s pay unless the specifically removed it.
Including Taxable Benefits in Pay
You need to make sure that you have included the amount recipient’s pay through which the fringe benefit’s value becomes more than the total of following amounts:
- Any amount the law excludes from pay
- Any amount the recipient paid for the benefit
Fringe Benefits Valuation Rules
To identify the most fringe value, you should be using general valuation rule. This rule allows you to determine the value of a fringe benefit is its fair market value.
Fair Market Value
The Fair Market Value of a fringe benefit is the amount that an employee has to pay to a third party in an arm’s-length for buying or leasing the benefit.
This amount is identified on the basis of particular facts and various circumstances. This benefit doesn’t depend on the amount that the employee want to be the fringe benefit value and not on the cost incurred by you to get benefit.
Set Up A Taxable Fringe Benefit Payroll Item
Follow the below-mentioned steps to set up a taxable fringe benefit payroll item:
- From the main menu, go to List > Payroll Item List.
- Click on Payroll Item option and click on New.
- Choose Custom Setup.
- Choose an option from Company Contribution or Addition, and click on Next.
- Company Contribution: Choosing this option will include the fringe benefit value to be taxed but the net pay doesn’t get increased.
- Addition: Choosing this option will include the fringe benefits value to be taxed and increases the net pay as well.
- Provide a name for the item and then click on Next.
- From the drop-down options, choose an Expense account and Liability account
- Select Fringe Benefits from the Tax Tracking Type and then click on Next.
- Click on Next twice (to bypass the Calculate based on quantity window).
- In the first section of Default rate and limit window, enter the default rate if the benefit is a particular amount.
- In the second section of window, enter the amount of any limit on the item.
- Click on Finish.
Once the payroll item is created, choose the scenario suitable for how the fringe benefit will be paid to the employee.
- If the amount is added on a paycheck with a regular wage for the taxes to get offset, provide the amount in the Other Payroll Items by using the Fringe Benefit. You don’t need to add any other deductions because the amount is not included on the net check. Only the taxes will get calculated here.
- In case the employee didn’t get any wages in the coming year and the employer will provide the tax amount to the employee. You need to click on Addition and for Tax Tracking, select None. An employee need to pay this amount back to the employer in the time duration mentioned in Publication 15.
- If the employee won’t receive any future wages for the current year, and the employer has to pay the taxes. Choose Addition, and Compensation for a Tax Tracking. Select the payroll item to gross up the check.
It is responsibility to determine the value of every non-cash fringe benefit. You can know more about the process at QuickBooks Support.
Technical Support For QuickBooks Desktop
This article should be helpful for you in creating taxable fringe benefits payroll items properly. In case, you require any kind of assistance, contact us at our toll-free QuickBooks Support Phone Number +1800-567-0425 for instant support.