Adding Car Allowance to Payroll Item

You are correct, SaraS2. Car allowances are classified as additional income for employees and are subject to taxation like other forms of compensation. By establishing it as a separate payroll item designated as a Car Allowance, one can effectively differentiate it from standard wages and other payroll components.

Here are the steps to add a Car Allowance to the Payroll List in QuickBooks Desktop:

1. Open QuickBooks and navigate to the Lists menu.
2. Select Payroll Item List from the dropdown options.
3. Click on the Payroll Item button at the bottom left, then New.
4. Choose Custom Setup and proceed by clicking Next.
5. Select Addition as the Type of Pay, and then proceed to Next.
6. Enter a designated name for the new payroll item, such as Car Allowance, and select the appropriate expense account that monitors employee allowances, then click Next.    
7. Follow the on-screen prompts to configure the tax tracking type as Compensation and check the corresponding boxes for applicable taxes (typically including Federal Income Tax, State Income Tax, FICA, etc.).
8. Set up the method for entering the car allowance amount on each paycheck.
9. Conclude by reviewing the information and clicking Finish.

When you run payroll, you can now include the car allowance for eligible employees by selecting the Car Allowance payroll item in their paycheck details.

Furthermore, you may find the following articles beneficial for learning how to pay and track fringe benefits on employee paychecks, as well as correcting any payroll items that may have inaccurate tax tracking in QuickBooks Desktop to ensure the accuracy of your employees’ paychecks:

• Create and run your payroll
• Add fringe benefits to paychecks
• Fix a payroll item with incorrect tax tracking type in QuickBooks Desktop Payroll

This process will adequately prepare you to manage payroll efficiently with this new addition. Reach out anytime if you need further assistance with QuickBooks. I’m just a message away.