How do I the tax implications for a custom pay type that was previously set up by my team?

I’m thankful for your inquiry, Brent. Let’s discuss the classification of pay types in QuickBooks Online (QBO) Payroll to support your effective payroll management strategy.

In QBO payroll, both allowances and other earnings pay types are taxable. Consequently, these pay types appear as regular wages on the W-2 form. It's important to note that the only non-taxable pay type available in QBO is the non-taxable per diem, designed for travel-related expenses without incurring tax liabilities.

Here’s a brief overview of the tax implications for allowances and other earnings pay types:

• Federal Income Tax (FIT): Taxable
• Social Security (SS): Taxable
• Medicare (Med): Taxable
• Federal Unemployment Tax Act (FUTA): Taxable

When it comes to reporting these payments, here’s how they appear on federal forms:

• Form 941: Reported in Boxes 2, 5a, and 5c
• Form 940: Reported as Regular Wages
• W-2: Reported as Regular Wages

Since this issue involves tax-related configurations, I suggest consulting a professional accountant. They can offer valuable insights and guidance to help you maintain compliance with tax regulations. Their expertise will ensure your payroll items are configured accurately in your account.

To further assist you in managing your payroll effectively, I’ve included links to helpful articles that guide you on adding or changing employees' work locations and customizing payroll reports in QBO Payroll. These resources will help you track employee expenses and tailor reports to meet your needs:

• Set up and manage work locations in QBO Payroll
• Run payroll reports
• Customize payroll and employee reports

Keep this conversation accessible for future queries regarding setting up additional pay types in QBO Payroll. My team and I are committed to ensuring you feel supported and empowered in your payroll tasks. We look forward to assisting you.