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H
hce
October 28, 2021
Question

How do I handle severance pay through QB payroll?

  • October 28, 2021
  • 1 reply
  • 0 views
I know there are no CPP and EI deductions, yet it is taxable. How do I set this up for an employee who will get a lump-sum?

1 reply

J
JamesM4
October 28, 2021

Hello hce, 

 

Glad to have you message us here. QuickBooks Online is a powerful program that help you keep track of your payroll. I'll be happy to share more info about severance pay in QuickBooks. 

 

Based on what you've described, I recommend using Other earnings as a pay type for your employee. Other earnings are taxable payments to your employee and they are separate from regular wages, such as retroactive pay increases and severance pay. You can add the Other Earnings pay type to an employee by opening their employee profile and navigating to the Pay section. Under Question 4 you'll see Additional pay types. Choose the Edit pencil to make changes. From here you can scroll to the bottom of the Common pay types section and check Other Earnings. You can customize this to read Severance pay if you wish by choosing to add + Another Other Earnings type.

 

Let me know if this info helps by leaving a comment below. I'll be here in case you have other questions. Otherwise, I wish you a great rest of the week. 
 

B
bangonbooks
January 17, 2022

How do you set this up to not be Pensionable or Insurable and to be entered into Box 67 on the T4?

T
Trish_T
January 17, 2022

Hi bangonbooks,

 

Thanks for reaching out to Community.  It's nice to see you back!  It's essential you're able to get the desired outcome with your payroll goals.  QuickBooks Online Payroll is a dynamic feature for ensuring your staff is paid on time with accurate calculations.  I'd be happy to steer you in the right direction so you're on the right track with your work!

 

QuickBooks Payroll is designed in accordance to the CRA requirements.  To ensure you're creating a severance pay for your employee that's non-pensionable or insurable, can be done by setting up another 'reimbursement' type and naming it as 'severance'.  However, to have it hit box 67 on the T4 you'll need to enter it manually on the CRA website.  

 

Here's how to create the severance pay item:

 

1. Open Payroll and then Employees from the left menu

2. Select the employee and then Edit employee

3. Click the Edit ✎ on the How much do you pay section

4. Open + Another Reimbursement type and give it a Name

5. Hit Save when done 

The item will be included when you run payroll for the employee where you can enter the desired amount.  For more information on pay types and deductions, click here. 

 

Please feel free to reach back out if you have any other questions.  We'd be glad to assist!

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