Home/ Client Management/ Employer Deductions and Payrates

Employer Deductions and Payrates

Overview

Define up to 18 additional income or deduction entries for employees. This feature provides flexibility in managing various types of employee compensation and deductions beyond standard payroll items.

Types of Entries

Income (I)

  • Added to gross pay
  • Check applicable boxes if the income is not subject to particular taxes

Deduction (D)

Two types of deductions:

  1. After-tax deductions - Examples: advances, union dues, loans
  2. Pre-tax deductions - Examples: 401(k), cafeteria plans

Match (M)

  • Employer contribution added to employee's gross pay for tax purposes only
  • Automatically deducted from net pay
  • Used for employer matching contributions, non-cash items, and fringe benefits

Defining Income or Deduction Entries

  1. Go to Employer > Deductions Setup.
  2. In the first column, enter a user-defined description for the item.
  3. In the second column, enter:
    • (I) for income
    • (D) for deduction
    • (M) for match (employer contribution)

    Setting Up After-tax Deductions

    1. Enter the description (e.g., "Union Dues")
    2. Enter D for deduction
    3. Do not check any of the tax exclusion boxes

    Setting Up Pre-tax Deductions

    1. Enter the description (e.g., "401-K")
    2. Enter D for deduction
    3. Check applicable boxes to exclude the amount from taxable income
    4. Enter the appropriate letter (A through T) in W-2 box 12 column

    Using Match Items

    Match items are used for:

    • Employer matching contributions to deferred compensation plans
    • Non-cash items received by the employee (e.g., meals, lodging, company automobile)
    • Taxable or non-taxable fringe benefits
    • Third party payments

    To set up a match item

    1. Enter the description
    2. Enter M for match
    3. Check applicable boxes to exempt from specific taxes, if necessary

    Understanding Gross Pay and Taxable Gross

    • Gross pay - Everything the company pays on behalf of the employee, including non-cash fringe benefits
    • Taxable gross - Gross subject to taxes

    Gross pay does not appear on tax forms or filings, while taxable gross appears on W-2s, 941s, and state filings.

    Special Entries

    SUI gross adjustment

    Use this field to adjust the gross wages reported on state quarterly unemployment returns.

    W-2 box entries

    Enter appropriate codes for W-2 boxes 12, 14, 11, or 10 as needed.

    Third party sick pay

    Follow specific instructions for setting up taxable and non-taxable third party sick pay.

    COBRA premium assistance payments

    Set up as a match item with specific tax exclusions and W-2 box coding.

    Troubleshooting

    Entry not calculating correctly

    1. Double-check the entry type (I, D, or M) is correct for your intended purpose
    2. Verify tax exclusion boxes are checked appropriately
    3. Ensure W-2 box codes are entered correctly if applicable
    4. Review the employee's pay stub to confirm the entry is calculated as expected

    Related Topics

    ← Back to Index