Skip to main content
M
McClerk
January 13, 2024
Question

How to adjust W2 for 139B Federal Income Tax Exclusion for volunteer fire fighters?

  • January 13, 2024
  • 1 reply
  • 0 views

Apparently, 26 USC 139B provides for an exclusion of up to $600 per year from federal income tax for volunteer fire fighters. We are a small municipality using QuickBooks and I could use some help how to adjust the W-2's to provide for this $600 exclusion. The exclusion only applies to federal taxes and does not apply to state taxes, so Box 1 and 16 will not match. Thanks in advance for any tips you can provide.

1 reply

R
Rasa-LilaM
January 13, 2024

Thank you for visiting the Community regarding your payroll concern, McClerk.

 

It's essential to maintain correct records of payroll items, such as your contributions and deductions. This is to ensure the data on your tax forms, especially your W2s are in order.  Let me direct you to the appropriate support that will guide you on how to effectively handle the $600 exclusion. 

 

It's vital to identify how the payroll item is tracked in payroll, including the tax tracking type to keep accurate and balanced data on the W2 form. I advise consulting with a tax adviser who can provide comprehensive insights into the process and assist you in recording the specified amount. When you have the information handy, follow these simple steps to set up the item:

 

  1. In your company, go to the Lists menu and choose Payroll Item List. 
  2. Click the Payroll Item button and select New.
  3.  Choose Custom Setup and Next.
  4. Select the item you want to configure. Common types include compensation, insurance benefits, retirement benefits, vacation pay, as well as other additions and deductions.
  5. Press the Next button and follow the prompts to enter information for the type of item you selected. 
  6. Follow the onscreen instructions.
  7. Click Finish when you're done.

 

For additional resources, the following links will walk you through the process of adding retirement and insurance items: 

 

Additionally, these resources will assist you in updating your employees' profiles, rectifying your obligations, and managing the W2 forms:

 

If you have any other questions or concerns about making corrections to the information on your W2 forms, feel free to drop a comment below and tag my name. I'll be delighted to respond to them. Have a wonderful weekend ahead! Best regards, McClerk.

M
McClerkAuthor
January 14, 2024

Can you go in-depth a little bit more as to how to set these items up to exclude the first $50 of earnings each month for these firefighters?

 

Is there a way to have this applied retroactively for the paychecks already received in 2023?

R
RoseJillB
January 14, 2024

Allow me to dive into this thread to assist you further, @McClerk.

 

With the steps provided by my peer above, let’s assume that you’re done creating the payroll item to track your payroll transactions. To add this to be excluded from your employee’s first earnings of the month, we can add this pay item to their profile to take effect.

 

Since they’re only set to be excluded on the first salary, we can remove them when running the second or next payout from your employee’s profile and repeat the same process on the next month. This item should appear in their paychecks. Here’s how you can add the item to the employee profile:

 

  1. Go to the Employees menu, and navigate to the Employee Center.
  2. Select your employee, and locate the Payroll Info.
  3. In the section for Additions, Deductions, and Company Contributions, add the pay item.
  4. Enter the amount per period and the limit.
  5. Select OK.

 

In QuickBooks, these changes won’t retroactively apply to your previous paycheck. Therefore, you may need to consult your accountant for further assistance in managing the prior payroll.

 

Additionally, QuickBooks offers a variety of payroll reports. This will give you a more thorough picture of the gross pay, deductions, and tax data for your employee over a specific time frame. For a comprehensive list of available payroll reports and instructions on how to get them, please visit this article: Run payroll reports.

 

You can always post if you have more concerns about managing your paycheck or any QuickBooks-related matters. I’m just a post away, and take care!

Terms & ConditionsAccessibility statement