Adding Healthcare cost to Pay Stubs using QuickBooks

I am a fan of the new reporting requirements to include employer paid healthcare costs on W-2s. Why? Because healthcare insurance has been on the rise for years and for most employees it is an intangible cost. Even if your policy is that employees pay 20% of healthcare premiums, few of them will do the math of what this benefit costs the employer on an annual basis. Including this cost on pay stubs will help each employee see this benefit in black and white each payroll.

Intuit Guide for Reporting Healthcare Costs

Note that you can click on any blue text to get more detailed information.

Action Items
1. Calculate the employer cost of coverage per employee. The IRS has provided a table of what types of coverage to include in the calculation. You will need to scroll down the page to see the table.

Plan ahead, you will need to do this calculation each time your premium rates change so take time to create a spreadsheet that will be useful in the future.

2. Calculate the per payroll amount. Example:
There are 26 payrolls in the year.
The monthly cost of coverage for employee Greg is $525.
The employee pays $25.
The employer then pays $500.
$500 (monthly cost) multiplied by 12 (months in a year) divided by 26 (payrolls in a year equals $230.77.

3. Follow the directions from Intuit to create a new payroll item for employer paid healthcare cost.

4. Add the item to each employee with the amount you calculated in #2.

5. There are a few options for adding historical information. Intuit includes a couple of options in the guide. If you want the total amount to appear on pay stubs for 2012, you can add the amount to date in the first payroll. You will then need to clear out the liability since you have already paid healthcare bills up to date.

6. Ensure you have your preferences set up to include the employer portion on paystubs.

Go to “Edit”>”Preferences” then click on “Payroll and Employees” then click on the “Company Preferences” tab.
Click on the “Pay stub and Voucher printing” button.
Put a check mark in the box marked “Non taxable company items”.

Please note adding this item to pay stubs will impact expense and liability accounts. Don’t panic if you suddenly see a liability for several thousand dollars after you add historical information. The fix is easy, just email or call me.

Here are some other resources to learn more about the topic:

W-2 Health Insurance Reporting on YouTube

Reporting of Employer Healthcare Coverage on Form W-2 Webinar

Embezzlement Alert: Who is processing your payroll?

Many companies outsource payroll processing at some level. You would know right away if your employees did not get paid, they would be lined up at your office door. But how do you know your payroll taxes are being paid? How do you know that your quarterly and annual reports to the government are being submitted?

My clients, I will call them NP, asked me to share their story in hopes that it would not happen to you. NP wanted to outsource payroll. They found a company that offered great rates for non-profits. NP did their due diligence and researched the company, talked to references, and contacted the Better Business Bureau. Green lights all around for this east coast payroll service provider. NP received their payroll report packets each payday, money was deducted from their bank account for taxes and they received copies of quarterly reports.

Unfortunately, each payroll seemed to have an error. NP’s bookkeeper or an employee would catch the error and they would correct it in-house. NP found it virtually impossible to get the service provider to fix errors. They finally decided to bring payroll back in-house and called me. I helped them set up payroll and submit corrected quarterly reports that fixed all the errors the east coast company had created.

Then they got ‘The Letter’. Turns out the payroll provider had never sent in any of their tax payments or the quarterly reports. Instead the east coast company had embezzled tens of thousands of dollars from NP and other clients and the owner of the payroll processing service was now in jail.

NOTE: No matter who processes your payroll, no matter who is responsible for paying the payroll taxes, the employer is liable for all payroll taxes period.

There are many levels of services to help you pay employees:

#1 You process payroll in-house utilizing the help of an advisor like an Accountant or CPA as needed.

#2 Payroll processing is out-sourced but the payroll taxes are paid by you in-house.
NOTE: Ensure you have printed (or pdf) copies of the payment confirmations for each tax payment submitted.

#3 Payroll processing is completely outsourced.
NOTE: Protect Yourself! Ensure you get a confirmation number for each payment submitted on your behalf with a preference for a copy of the actual confirmation page.

#4. If all this sounds daunting you can lease employees. This means you are not the employer and are not liable for payroll taxes. You just need to pay your lease.
NOTE: Treating employees like contractors is one of the hottest topics at the State and Federal level. Attempts to avoid the pains of payroll by using “contactors” could lead to lengthy meetings with BOLI and a few other government agencies. Unless the idea of lengthy meetings with government officials sounds fun, don’t risk it, lease employees instead.

Who can help?

The biggest benefit of using local services is the ability to talk to a human, the same humans, whenever you have payroll questions. Money saved with inexpensive online payroll services is quickly lost when errors arise that monopolize your in-house resources.

Visit the Corvallis Chamber of Commerce
Search for: Accountants and/or Payroll to find local resources for payroll processing.

Barrett Business Services in Albany offers Employee Leasing, visit their site or call them at 541-928-4130.
Tell ‘em Jackie sent you.