Additional Amounts
Additional amounts may need to be included on W-2s, such as excess life insurance, reimbursed employee business expenses, and other fringe benefits.
A discussion on treatment of these various items follows. Some of these items must be included in Gross Wages in Box 1. You may have already included amounts such as Excess Life Insurance in Gross Wages if you deducted Social Security and Medicare during the year. If the income for these items was not recorded in the Employee Earnings table, you can enter a "dummy" check or checks in the Manage Employee Earnings History screen (enter the amounts as Gross Wages). This includes the amounts in all reports that use the Employee Earnings table, including the W-2s, the quarterly reports, and the Earnings Report. If you do not want the quarterly reports to include a particular additional amount, do not add the amount to the Employee Earnings table until you print the quarterly reports. Amounts entered as Gross Wages are automatically included in Social Security and Medicare Wages unless the amount is also entered as Exempt wages on the Manage Employee Earnings History screen.
Excess Group Life Insurance
Premiums paid for employees for life insurance policies whose value is in excess of $50,000 are taxable. Include the value of group term life insurance (EXLI) in Gross Wages (Box 1), Social Security Wages (Box 3), Medicare Wages (Box 5), and in Box 13 as Code C.
The usual way to handle this is to set up a deduction with an ADDGRS method and process excess life for each pay period. This has the effect of increasing the gross wages, calculating Social Security and Medicare to be withheld, deducting the amount as a deduction, and reducing net pay for the Social Security and Medicare on the gross pay increase (since excess life insurance is not a cash payment to the employee). For state and local wages, the excess life value is added to the respective state and local W-2s' Gross Wages boxes if the State and Local subtasks of the Manage Deductions screen have W-Taxable in the Income Taxability column, or if the Federal subtask is set to Taxable, Not Subject to W/H. If you were not using this method to process excess life each pay period, you must add the amount to a regular paycheck after creating payroll.
Non-Cash Fringe Benefits
Non-cash fringe benefits are generally included in gross wages (Box 1). If these benefits were not added to gross wages, enter the amount as gross wages on a "dummy" check dated in the last calendar quarter on the Manage Employee Earnings History screen. You must also associate the pay type that you are using for the non-cash fringe benefits with Box 12.
Reimbursed Employee Business Expenses
If the amount you reimbursed employees for business expenses exceeds the government specified rates, you must include this excess amount as income to the employee. This income is subject to Federal Income Tax, Social Security Tax, Medicare Tax, and FUTA Tax. To include this amount in Gross Wages and Box 1, add this amount as Gross Wages on a "dummy" check on the Manage Employee Earnings History screen. Enter the amount you reimbursed equal to the government-specified rates on the Manage W2s screen in Box 13 as Code L.
If the total reimbursement is less than or equal to the amounts allowed under government-specified rates, do not add any amounts to Gross Wages or in Box 13 as Code L.
Dependent Care Benefits
Employer-paid dependent care benefits must be shown in Box 10. Add amounts in excess of $5,000 paid during the year to Gross Wages by adding the amount as Gross Wages on a "dummy" check on the Manage Employee Earnings History table. If the dependent care benefits provided are deducted from employees' paychecks, this deduction is identified when creating W-2s by the deduction type established on the Manage Deductions screen; the year-to-date amount deducted is printed in Box 10. If the amount of the dependent care benefits was not deducted from the employees' paychecks, or if the total amount provided was greater than the amount deducted, use the Manage W2s screen to enter the amounts for Box 10.
Non-Qualified Plans
Distributions to employees from Non-Qualified Deferred Compensation Plans or Section 457 plans must be included with wages in Box 1 and in Box 11. To add the amounts to Box 1 and Box 11, use a "dummy" check to enter the amount as Gross Wages on the Manage Employee Earnings History screen with a pay type whose taxability is associated with Box 11 on the Configure Pay Type Taxability screen.
Sick Pay
If you had employees who received sick pay from an insurance company or other third-party payer, and the third party notified you of the amount of sick pay involved, enter a "dummy" check for the taxable amount as Gross Wages on the Manage Employee Earnings History screen. If Federal Income Tax, State Income Tax, Social Security, and/or Medicare taxes were withheld, enter these amounts on the same "dummy" check.
If the employee contributed to the sick pay plan, a portion of the sick pay is not taxable. This is computed as:
Amount the employee contributed = Sick Pay Percentage
Cost of the plan for the employee
Multiply the sick pay percentage by the sick pay income to arrive at the amount of the "dummy" check. On the Manage W2s screen, enter the amount that is not taxable in Box 13 with a Code of J.
For example, if an employee's sick pay insurance premium is $40 per month, and the employee has $10 per month deducted, the employee is paying 25% of the cost of the sick pay plan. Therefore, if the employee received $1,000 in sick pay from the third party, 25% of the sick pay is not taxable to the employee. $750 is entered on the "dummy" check and $250 is entered in Box 13, Code J.