Continue using your Health Insurance deduction for the employee as you normally would. The reporting of the Employer Sponsored Health Care will not change what you are currently doing with your employee’s insurance AND this amount you’re reporting for the Employer Sponsored Health Care is NOT taxable and the values are NOT included in the employee’s taxable income.
Set this up at Year End:
1) Setup an Additional Income Category, Variable, Omit from Net and exempt from ALL taxes. Check Box 12 and Enter Code DD.
2) Assign the income to all employees that receive the benefit on the Income tab in Employees under Setup so at the end of the year you can enter the correct amount. This should be ca combination of the employee and employer portion.
3) At the end of the year after you have done your last payroll, you need to do a zero check (to show a paper trail) or if you prefer a YTD adjustment for the Employer Sponsored Health Care.
You will want to do this after your last payroll because it will show in the gross earning on some reports such as your earnings register.
If this is forgotten, and you put it in before the last payroll, just remember to subtract that amount out for the correct totals. You won’t need to subtract this number from the tax reports because the insurance is not taxable, thus won’t show on the report. So tax forms, W2, 940, and 941 will show correctly.
When making a zero check, the employee will see it as an additional income on the check, but it won’t be included in the net and it won’t be taxed, thus creating a check with a zero($0.00) amount.
It will show on the W2 in Box 12 with Code DD – it does NOT show on the W3.