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VickiWNTA
February 2, 2021
Question

Health insurance deduction set up

  • February 2, 2021
  • 2 replies
  • 0 views

I have QB On-line.  I offer health insurance to our employees - we pay part, employee pays part.  Ohio business.   Nothing fancy about health care - no savings, just plain jane health insurance.  I want to deduct the amount from the employee's check indicating his portion of the premium each week.  As I understand this would be PRE tax.  I understand about putting in the amount that comes from the employee and how much I pay when setting up.  I am receiving conflicting information about how this should calculate my taxes.  After the health insurance is deducted from the GROSS pay, how are the taxes affected?  ie - what is federal, social security, medicare, deducted from - all from the gross pay, all from the adjusted pay, or different depending on the tax?  I have read TOO much and am overwhelmed now.  We will start here - and then I will probably have more questions - that is just how I am.

 

2 replies

C
Charies_M
February 2, 2021

It's nice to have you here, VickiWNTA.

 

When setting a Pretax Health Insurance in QuickBooks Online, the taxes are calculated on the reduced salary amount which results in less income tax.

 

Here's how:

 

  1. Go to the employee's profile. 
  2. Select on the employee and go to section 5, click + Add deduction link.
  3. Select these options from the drop-down: 
      - Deduction/contribution or garnishment: Deduction/contribution
      - Deduction/contribution type: Health Insurance
      - Type: Medical Insurance
  4. Enter the provider and the amounts for Employee and Company-paid fields. 
  5. Select Pre-tax insurance premium.
  6. Click OK.
     

Find out more about the different deduction types including health insurances (Proceed to the Health Insurance section): Add or change pay types.

 

Also, I'll add this article as your reference in adding and updating deductions and contributions for your employees: Add or edit a deduction or contribution.

 

For additional reference, you can learn more about setting up a retirement plan deductions and contributions.

 

Get back to me if you need further help with anything about QuickBooks. Have a nice day.

V
VickiWNTAAuthor
February 3, 2021

Thank you for the response.  I have set it up that way.  Need to verify how it will calculate the taxes.  ie.  what is calculated as PRE tax and what is calculated After the deduction.  ie - Federal, SS, Medicare.  

C
Charies_M
February 3, 2021

I appreciate you coming back, VickiWNTA.

 

When setting up pretax health insurance in QuickBooks Online (QBO), the following are exempted: 

  • Federal Income Tax (FIT)
  • Social Security (SS)
  • Medicare
  • Federal Unemployment Tax Act (FUTA).

In terms of how the taxes are reported on your federal forms, you can take note of the following below:

  • 941: Decreases boxes 2, 5a, 5c
  • 940: Box 4 and 4a checked
  • W-2: Decreases boxes 1, 3, 5

In case you miss it, you can have this article as your reference. (Proceed to Pretax health insurance drop-down): Add or change pay types.

 

Know that you're always welcome to post here in QuickBooks Community if you have any other concerns. 

    J
    JulieAVE
    August 23, 2021

    I am using assisted desktop payroll, the options are not quite the same as the ones shown for online. Can I get a step by step explanation or should I contact assisted payroll directly?  Julie 

    Rubielyn_J
    Rubielyn_J
    August 23, 2021

    I've got your back, @JulieAVE. I can share the steps by steps process of setting up Health insurance in QuickBooks Desktop.

     

    There are two ways on how you can set up insurance benefits. You can choose either of the following: 

     

    Structure an insurance benefit item using EZ setup:

     

    1. Go to the Lists menu.
    2. Select Payroll Item List and click the Payroll Item button.
    3. Choose New.
    4. Select EZ Setup and click Next.
    5. Follow the onscreen setup instructions, which prompt you to answer a series of questions based on the item type.

     

    After you create a payroll item, Intuit recommends you edit the payroll item to ensure all necessary information is entered.

     

    Second option is to create an insurance benefit item using custom setup:

     

    1. Go to the Lists menu and select Payroll Item List. 
    2. Choose the Payroll Item button and click New. 
    3. Select Custom Setup and click Next. Choose Deduction and click Next.
    4. Name the deduction item and choose Next. 
    5. Enter the Agency for the employee-paid liability, and the account number and the liability account for the payroll item and select Next.
    6. Choose the Tax Tracking Type and select the type required for the correct tax classification. Click Next.
    7. In the Taxes window, do not change any of the taxes and click Next.
    8. In the Calculated Based on Quantity window, choose Neither and click Next.
    9. In Gross vs. net, if the amount of deduction is a percentage (%) of employee's gross earnings, select gross. If it is a fixed dollar amount select net. If calculation varies from one employee to another, you will need to set up separate items. 
    10. Enter a default rate only if all employees pay the same amount for health insurance and select Finish.
    11. Add the item to the appropriate employee profiles and enter an amount for each payroll deduction.

     

    Additionally, let me attached these articles that might be helpful for future use. This will help you manage your health insurance and spending account.

     

     

    Drop me a comment below if you have other concerns or follow-up questions about health insurance deduction. I'd be more than happy to assist you again. Stay safe and take care.

    F
    fergfontaine
    January 10, 2022

    I am reading through the Q&A for my scenario.  We are good and all set up with our employee insurance.  The employees pay 25% and that is a weekly deduction from their paycheck.  This year one of the employees asked to add her husband, this will be paid 100% by her.  I created another liability, the same as the 25% and called it Employee Insurance - Spouse, and added the flat weekly fee she will be paying.  However, that payment is showing up as a liability for me to pay.  The previous amount never showed up in liabilites, it deducted from check and kept a report for all employees.  How do i fix this?  I do not want the weekly deduction to go to our Insurance carrier, it should only come to her employer since we are paying the insurance in full.  If i set up wrong, will someone help me to set up correctly?

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