Note: These instructions are for Quickbooks Desktop. Instructions for Quickbooks Online 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:
- From the Employees menu, choose Manage Payroll Items > New Payroll Item.
- Select Custom Setup and click Next.
- Select Company Contribution and click Next.
- Enter a unique name for this new payroll item, which will appear on employee pay vouchers, pay stubs, and on payroll reports (for example, "Reportable Qual. Small ER HRA" ). Click Next.
- Leave the agency information blank. This is a tracking and reporting item only, not a true liability item.
- Click the arrow next to the Liability account box, and select <Add New>.
- In the Add New Account window, choose Other Expense as the Account Type and enter a new Account Name (for example, "Reportable Qual. Small ER HRA"). Click Save & Close.
- Click the drop-down next to the Expense account box and select the account you just created. Click Next. Note: If you are creating more than one payroll item for tracking QSEHRA payments, continue to use this account for both the liability and expense accounts. Setting both the liability and expense accounts the same creates a "wash" item that shows a zero amount on your Profit & Loss statements. This allows you to track QSEHRA payments for W-2 reporting purposes without these numbers affecting your financial reports.
- Click Yes to ignore the warning that you have set your liability account and expense account to the same account.
- Click the arrow for the tax tracking type, and select the new tax-tracking type Qual. Small ER HRA. Click Next.
- Click Next to accept the default tax settings.
- Click Next to accept the default settings on the Calculate based on quantity page.
- Click Finish to accept the default settings on the Default rate and limit page.
Any amounts tracked with the new tax-tracking type will be reported as required on Box 12 of Form W-2 code FF.
TAXABLE REIMBURSEMENTS (QSEHRA Only)
While most reimbursements through QSEHRA are tax-free, there is one type of allowable reimbursement that must be taxed. Premiums paid pre-tax through a spouse's employer for a group plan must be reimbursed on a taxable basis- you can read more about that here.