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The Payroll module can perform the necessary tax calculations and provide reporting for processing taxable, noncash fringe benefits. When the Payroll module is properly set up, taxes are deducted automatically for all fringe benefits reported, and the net pay amount is adjusted. The fringe benefit amounts are properly recorded and reported on employee W-2 Forms. Multiple earnings codes can be set up as fringe benefits, and an automatic deduction will be established for the gross amount of the fringe benefits.

 Defining Fringe Benefit Earnings and Deduction Codes

Earnings codes that are used to record fringe benefits must first be established in Earnings Code Maintenance with the fringe earnings type. The fringe earnings type is used to specify noncash fringe benefits (for example, life insurance or use of company automobile).

When an earnings code with the fringe earnings type is entered in Payroll Data Entry, an offsetting line with deduction code FB is created automatically to deduct the Fringe Earnings line amount from the net check amount. Deduction code FB is a permanent record and cannot be deleted. The fringe benefit earnings are added to the gross wages. The fringe benefit information is included in the gross amount and is printed in the box labeled Benefits included in Box 1 on your W-2 Forms.

 

 Fringe Benefits and Employee Maintenance

The Fringe Benefit field on the Benefits tab in Employee Maintenance is used to display year-to-date fringe benefit amounts (all earnings entered with the fringe earnings type) received by the current employee and reported as taxable income.

The field on the Benefits tab can only be viewed. If you need to manually enter the year-to-date amount, click the arrow in the top-right corner of the window and select Tax Summary. On the Employee Tax Summary window, click Benefits. You can then edit the Fringe Benefits field in the Benefits window.

 

 Reporting Tips

The Payroll module can perform the tax calculations and provide tip reporting. When the Payroll module is properly set up, taxes are deducted from taxable tips reported, and the net pay amount is adjusted. If necessary, tip differentials are applied automatically to bring the employees' wages up to the current minimum wage.

In addition, the Payroll module calculates cumulative totals and prints the tax and tip information on W-2 Forms, in accordance with governmental regulations. If there is at least one employee with reportable tip earnings, a Tip Detail Report prints following the printing of the Quarterly Tax Report.

When a large amount of tips is reported with a smaller amount of wages, a negative check cannot be printed. To comply with the federal/state labor laws, employees must be issued a voucher reporting their wages/taxes for each pay period.

Use a negative deduction code with an amount equal to the negative net check amount. This results in the printing of a $0.00 check. This check is a void check, and the stub information prints the negative deduction code amount owed to the employer.

 

 Example - Fringe Benefit Deduction Codes

Assume that earnings code MI (Mileage) was created with the fringe earnings type. If you use earnings code MI in Payroll Data Entry to record employee mileage for personal use of a company car, you do not want to include this cents-per-mile amount in the net check amount. In Payroll Data Entry, the entire amount of earnings code MI has an offsetting line with deduction code FB created automatically. This prevents the mileage line amount from being included in the net check amount.

The benefits of using this method of reporting fringe benefit allowances are that the fringe amounts are reported as gross earnings; the proper taxes are deducted from the regular pay; and the fringe deductions are printed in the box labeled Benefits included in Box 1 on your W-2 Forms.

 

For more information, see Earnings Code Maintenance.