Record the value of an employee gift on a paycheck and have the company cover the taxes

Greetings! jprice13. We are thrilled to have you join our Community space and appreciate your visit to our forum. It is our pleasure to assist you with how you can record the gift on a paycheck in QuickBooks Desktop (QBDT).

We can record the gift made to an employee using the in-and-out method. Since the employee already received it, we don't want to increase the net pay of the check. The "in" will add the gift as regular wages so it can be appropriately taxed. And the "out" will be pulling the gift back out of the check since it was already paid. I'll be glad to show you how.

There are two ways to track gifts made to an employee. You can track it as: 

• Compensation if you want it to show on Boxes 1, 3, and 5 of the W-2.
• Fringe Benefit if you want it to show on Boxes 1, 3, and 5, reported in Box 14 of the W-2.

Here are the steps to set up a new additional payroll item in QuickBooks:

1. Go to Lists, then Payroll Item List.
2. Select the Payroll Item ▼ dropdown, then New.
3. Hit Custom Setup, then Next.
4. Pick Addition, then Next.
5. Enter the name of the Addition item, such as Gift Card Pay. Select Next.
6. Select the Expense Account where you want to track the item, then Next.
7. In the Tax tracking type window, select:
   • Compensation if you want it to show on Boxes 1, 3, and 5 of the W-2.
   • Fringe Benefit if you want it to show on Boxes 1, 3, and 5, reported in Box 14 of the W-2.
8. Select Next three times, then Finish.

For more details, please refer to this article: Create a zero net paycheck.

I'll be adding these links to guide you further in the future:

• Create Bonus Paychecks In QuickBooks Desktop Payroll.
• Pay A Bonus On Separate Paychecks In QuickBooks Desktop Payroll.

Moreover, visit this article if you want to learn more about how to prepare and file your federal 1099s in the future: Create and file 1099s without payroll.

If there's anything else you need help with aside from recording a gift, please let me know by commenting below. I'm more than happy to help. Have a great day!