Note: These instructions are for Quickbooks Online Payroll. Instructions for Quickbooks Desktop can be found here.
TAX-FREE REIMBURSEMENTS (QSEHRA & ICHRA)
Because these payments aren't taxable, they don't appear on payroll tax or other tax reports.
To set up tax-free reimbursements:
Intuit Online Payroll and Intuit Full Service Payroll
- Select Employees, then select the employee's name.
- In Pay section, select Edit.
- Under What additional ways do you pay employee, select Show all pay types.
- Select Reimbursement pay type. You may enter a recurring amount in the box, or add it when creating paycheck. You can also rename this pay type to something like "QSEHRA Reimbursement" or "ICHRA Reimbursement" by selecting Add/edit types > Add Reimbursement name. (If using Intuit Full Service Payroll and this option is unavailable, contact Payroll Support for assistance.)
- Select OK.
QuickBooks Online Payroll and QuickBooks Online Payroll Full Service
- Select Workers from the left menu, then select Employees.
- Select the employee's name.
- Select edit (pencil) icon beside Pay.
- Under How much do you pay, select Add additional pay types.
- Select Even more ways to pay... drop-down, then select Reimbursement. You may enter a recurring amount in the box, or add it when you run payroll. You can also rename this pay type to something like "QSEHRA Reimbursement" or "ICHRA Reimbursement" by selecting selecting the pencil icon beside Reimbursement.
- Select Done.
Next time you create a paycheck for the employee, the Reimbursement item appears in the Pay column. Enter the reimbursement amount to add to the employee's paycheck. You can change the amounts each month if the reimbursement amount will not be fixed each month.
Once a reimbursement is added, you can also assign this to another employee. After assigning the reimbursement to the employee, check your accounting preference to ensure it is posted in the correct accounts for exporting purposes.
TAXABLE REIMBURSEMENTS (QSEHRA Only)
While most reimbursements through QSEHRA are tax-free, there are a few types of allowable reimbursements that must be taxed. Taxable reimbursements through QSEHRA include premiums paid pre-tax through a spouse's employer for a group plan and over-the-counter medications. In addition, monthly premiums on sharing plans, called monthly shares, can be reimbursed on a taxable basis alongside QSEHRA.
Taxable reimbursements are reported as income and taxed like regular Wages with income & payroll taxes withheld. You can add this by adding an "other earnings" type for each employee with taxable reimbursements. To add the Other earnings pay type for an employee:
- In the left navigation bar, click Employees.
- Click the name of the employee you want to pay.
- Click Edit employee.
- Under How much do you pay the employee , click the pencil icon.
- Select the Other Earnings checkbox, and enter a recurring amount (optional).
- Give your other earnings pay type a name, like "QSEHRA Reimbursement," in case you add more than one other earnings pay type.
- Click Add other earnings type to add another pay type.
- Click Done.
Quickbooks also has a unique tracking code for QSEHRA reimbursements. Note, this will not actually cause the transfer of money to happen ("tracking only") but it'll automatically populate QSEHRA reimbursements on your employees' W2s at the end of the year. Remember, what goes on the W-2 for QSEHRA is the amount offered and not the amount claimed. This goes on Box 12, Code FF. QBO has instructions on how to update your W -2 forms here.