Setup Pretax Deductions QuickBooks Payroll
Certain paycheck deductions are made in the Pre-Taxation period. That means the wages of the employees are reduced by the deductions amount before the taxes are calculated. This way, the employees pay less tax.
Depending on the selected deduction type, QuickBooks automatically applies the deductions after you set up your QB Payroll deductions — either to pre-tax or after-tax amounts.
Types Of Deduction Can Apply Before EMP Salary Calculation
1. 401(k) plan deductions
If you have set up a 401(k) plan or other eligible retirement plans, the employee paycheck deductions will not be subjected to the federal income tax, while they are still subjected to Medicare, Social Security, and federal unemployment taxes.
Different State laws will vary from whether these deductions are subject to state unemployment, state income, or other state taxes. Your QuickBooks Payroll takes account of the law of the state at which you are located when calculating the retirement plan deductions.
2. Cafeteria Plan Deductions
If you have set up cafeteria plan (Section 125 Plan), employees can pay vision, medical, and dental insurance premiums with the pretax paycheck deductions. The deducted amounts are exempted from Medicare, Social Security, federal income, and federal unemployment taxes.
Different State laws will vary from whether deductions for cafeteria plan are subject to state unemployment, state income, or other state taxes. Your QuickBooks Payroll takes account of the law of the state at which you are located when calculating the Payroll deductions.
3. Health Savings Account Deductions
As for Health Savings Account (HSA), the employees’ pre-tax deductions can be included with the cafeteria plan. However, to handle taxes appropriately, it is recommended to set up the HSA Pre-Tax deductions separately from Cafeteria Plan. The Pre-tax deductions are exempted from federal taxes but may be taxable in some local and states jurisdictions. You Can explore more details of Health Insurance Deduction in QuickBooks .
What’s Are Transit Benefits Deduction QB Payroll
Setting Up QuickBooks Pre Tax Payroll Deduction for Transit Benefits
You can set up Pre-Tax vision deduction and use it to enter monthly section 132 amount up to IRS limits. It won’t be reported on any other tax forms (even on W-2s). However, once it reaches its limit then it then becomes report able and taxable.
Note: Because of Future Health Insurance W-2 reports requirement, ensure to select VISION as the Pre-Tax type while performing the following workaround.
- Click on Workers from the left Menu Bar.
- Double-click on Employee’s name to edit the details.
- Click on the edit (Pencil) icon next to the Pay section.
- Click on Add New Deduction then drop down the list and select Health Insurance. (Remember to select VISION Insurance as the deduction type).
- You can enter the customized name of the Provider for it to directly appear on employee’s paycheck. Example: Martin Transit Benefit.
- Enter the Per Pay period and the maximum annual amount.
- Select the Pre-tax insurance premium then click on OK.