Here are descriptions of the supported pay types and deductions in Online Payroll as well as how each impacts federal taxes and forms.

Taxability Types: Defined

Look at each item for a definition of how you can expect each item to affect your payroll tax reporting.

Deferred: Deduction tax exempt at time funds are withheld from wages and not taxed until the funds are withdrawn.

Exempt: Wages are exempt from tax and not included in tax calculation; deduction items are exempt from tax and reduce taxable wages (decreasing tax withheld)

Subject: Wages are taxable and reported as such on forms, but no additional tax is withheld on paycheck

Taxable: Wages or deduction items are fully taxed

Regular Wages: These are wages paid to employees either in fix amount or in hourly rate. Pay types such as allowance, commission, overtime, holiday pay, and other earning are also reported as regular wages in most tax forms.

Pay types

Allowance | Bereavement

Allowance - An allowance is a taxable payment to an employee that's separate from regular wages. An amount of money given or allotted usually at regular intervals for a specific purpose. It's typically paid with each payroll to cover job-related costs, such as uniforms or auto usage. Yet, it's taxable because it's not dependent upon actual receipts.

Allowance amounts aren't included in the pay base for calculation of percentage-driven deductions such as 401(k). Don't treat expense reimbursements as allowances; expense reimbursements are not taxable payments.

Bereavement - Bereavement covers time-off for employees who experience the death of a family member or friend and need to attend a service or grieve.
Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5a, 5c Regular Wages Regular Wages
Related:

Cash Tips | Paycheck Tips

Cash Tips - Cash tips are gratuities that are paid to employees in cash, rather than through their paycheck. You enter the reported cash amount so that we can withhold the taxes for these tips when you create paychecks. Use the Cash tips pay to track cash tips reported to you by your employee, and for tips charged on credit cards that you pay out to employees in cash (for example at the end of each shift).
Paycheck Tips - Paycheck tips are gratuities that are paid to the employee on their paycheck, rather than in cash. Use the Paycheck tips pay type if the patron included the tip on a credit card charge and you pay the tip to the employee through their paycheck when you run payroll. We withhold taxes and include Paycheck tips in wages.
Taxability
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5b, 5c Box 3 Boxes 1, 5, 7
Pay type use examples:
  • Paycheck tips: A tip was left by credit card and the employer needs to pay this out to the server on their regular paycheck.
  • Cash tips: A tip was left in cash and the server already has the funds in hand. The employer only needs to report the amount so it's taxed as income.
Related:

Clergy Housing (Cash | In Kind)

Clergy Housing (Cash) is a payment that you make to a duly ordained minister as a rental allowance for a house, furnishings, utilities, and so on. These payments are exempt from income tax but subject to self-employment tax (calculated and paid by the minister) and will affect the net pay.
Form W-2 Reporting: We report these amounts on the pay stub and in Box 14 of Form W-2. No payroll taxes will be calculated with respect to these amounts.
Clergy Housing (In-kind) can be used to report the value of a house, furnishings, utilities, and so on that you furnish to a duly ordained minister as part of the minister's pay. These amounts are exempt from income tax but subject to self-employment tax (calculated and paid by the minister) and will not affect the net pay.
Form W-2 reporting: We report these amounts on the pay stub and in Box 14 of Form W-2. No payroll taxes will be calculated with respect to these amounts.
Taxability:
FIT SS Med FUTA
Exempt Exempt Exempt Exempt
How it's reported on federal forms:
941 940 W-2
Does not show up
Does not show up
$ amount in box 14 with "CLERGY HSG"
Pay type use examples:
  • In Kind: A ministry provides housing to a clergy member and only needs to report the amount on Form W-2 without increasing the net of the paycheck.
  • Cash: A ministry gives funds to a clergy member through payroll to pay for their own housing.
Related:

Commission

Commission is a form of compensation that's typically based on an employee's sales performance or completion of a task. Commission can be paid in addition to a salary or instead of a salary. Hourly employees who also receive a commission must be paid at least the minimum wage for hourly workers.
You can add multiple types of commission pay and give each one a unique name. The custom pay types will then be available when you set up your other employees.
Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5a, 5c Regular Wages Regular Wages
Related:

Company Contribution to an HSA

Company HSA Contribution is the amount you contribute each payday to the employee's health service account (HSA).
Form W-2 Reporting: On Form W-2, your contributions to an employee's HSA are reported in Box 12 but excluded from federal wages and most state wages. If your contributions are taxable at the state or local level, we include the amount in taxable state wages.
S Corp Limitation: For shareholder-employees who own 2% or more of an S Corporation, do not select Company HSA contribution. Your contributions are taxable at the federal level and in some states.
Taxability:
FIT SS Med FUTA
Exempt Exempt Exempt Exempt
How it's reported on federal forms:
941 940 W-2
Does not show up
Boxes 3, 4, and 4b checked
$ amount in box 12 with code W
Related:

Double Overtime

The Fair Labour Standards Act (FLSA) has no requirement for Double Overtime (or Double Time) pay. This is a matter of agreement between an employer and employee (or the employee's representative). However, some states may have a Double Overtime requirement. Employer should contact their state agency for further guidance on Double Overtime (Double Time).
Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5a, 5c Regular Wages Regular Wages
Related:

Group-Term Life Insurance > $50,000

Taxability:
FIT SS Med FUTA
Subject Taxable Taxable Exempt
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5a, 5c
Boxes 3, 4, and 4b checked
Boxes 1, 3, 5 and $ amount in box 12 with code C
Related:
Note about GTLI on the Tax and Wage Summary report:
GTLI amounts will not create additional tax withholding when included on paychecks, but will be reported as taxable wages on tax forms, such as Form W-2. Because of this, these amounts will appear as "Excess Wages" for Federal and State income tax on the Tax and Wage Summary report. These are not true "Excess Wages". Please refer to the "Total Wages" column for the total taxable wages.

Holiday Pay

Holiday pay is compensation for holidays, like Christmas Day, when a business may be closed and the employee is allowed to take the time off from work.
Though, the Fair Labour Standards Act (FLSA) doesn't require employers to pay employees for time not worked, such as vacations or holidays (federal or otherwise), many employers provide holiday pay as a benefit. These benefits are generally a matter of agreement between an employer and an employee (or the employee's representative).
Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5a, 5c Regular Wages Regular Wages
Related:

Nontaxable Per Diem

Nontaxable per diem amounts are fixed, nontaxable daily allowances to pay for lodging, meals, and incidental expenses incurred during travel. Typically, nontaxable per diem is used in industries where travel is a required part of the job, such as truck drivers. Unlike expense reimbursements, nontaxable per diem amounts are reported on W-2 forms.
Form W-2 Reporting: Because these payments are not taxed, they are not included in the pay base for calculation of percentage-driven deductions such as 401(k). However, they do appear in Box 12 of W-2 forms.
Taxability:
FIT SS Med FUTA
Exempt Exempt Exempt Exempt
How it's reported on federal forms:
941 940 W-2
Does not show up
Does not show up
$ amount in box 12 with code L
Related:

Other Earnings

Other earnings are taxable payments to an employee that are separate from regular wages, such as retroactive pay increases and severance pay. The amounts are included in the earnings base and used to calculate percentage-driven deductions such as 401(k).
Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5a, 5c Regular Wages Regular Wages
Related:

Overtime

For covered, nonexempt employees, the Fair Labour Standards Act (FLSA) requires overtime pay (PDF) to be at least one and one-half times an employee's regular rate of pay after 40 hours of work in a workweek. Some exceptions apply under special circumstances to police and firefighters and to employees of hospitals and nursing homes.
Some states have overtime laws. In cases where an employee is subject to both the state and federal overtime laws, the employee is entitled to overtime according to the higher standard (i.e., the standard that will provide the higher overtime pay).
Extra pay for working weekends or nights is a matter of agreement between the employer and the employee (or the employee's representative).
Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5a, 5c Regular Wages Regular Wages
Related:

Personal Use of Company Car (PUCC)

Personal use of company car (PUCC) is for employees who use a business vehicle for personal purposes. It's a taxable benefit provided in-kind, and you must include the value of the personal use in the employee's wages.
Taxability:
FIT SS Med FUTA
Subject Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 5a, 5c
Box 3
Boxes 1, 3, 5 and $ amount in box 14 with "PUCC (CAR)"
Related:
Note about PUCC on the Tax and Wage Summary report:
PUCC amounts will not create additional tax withholding when included on paychecks, but will be reported as taxable wages on tax forms, such as Form W-2. Because of this, these amounts will appear as "Excess Wages" for Federal and State income tax on the Tax and Wage Summary report. These are not true "Excess Wages". Please refer to the "Total Wages" column for the total taxable wages.

Reimbursement

Reimbursement is an act of compensating someone for an expense. Often, a person is reimbursed for out-of-pocket expenses when the person incurs those expenses through employment or in an account of carrying out the duties for another party or member.

Common examples are firms compensating individuals who buy supplies for their companies, or firms compensating employees on field or out-of-town assignments who pay for their stay and transportation.

Taxability

FIT SS Med FUTA
Exempt Exempt Exempt Exempt
How it's reported on federal forms:
941 940 W-2
Does not show up
Does not show up
Does not show up
Related:

S-Corp Owners Health Insurance

S-Corp owner's health insurance is for accident or health benefits provided to 2% shareholders of an S corporation.
Most states follow the same taxability rules as federal, but there are some states that don't. For more info, contact your state agency (see Payroll Resources: State government resources for contact info).
Taxability:
FIT SS Med FUTA
Taxable Exempt Exempt Exempt
How it's reported on federal forms:
941 940 W-2
Box 2
Boxes 3, 4, and 4a checked
Box 1 and $ amount in box 14 with "S CORP OWNER"
Note: If the shareholders participate in a different plan than is offered to all employees, the cost of their premiums will be fully taxable. See  tables below for taxability and reporting:
Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Boxes 2, 3, 5a and 5c
Box 3
Boxes 1, 3, 4, 5, 6 and $ amount in box 14 with "S CORP OWNER"
Intuit Full Service Payroll and Quickbooks Online Full Service Payroll customers:
Our system currently does not support full taxability, please contact Payroll Support to get this S-Corp plan recorded.
Intuit Online Payroll and Quickbooks Online Payroll customers:
Our system currently does not support full taxability.
Related:

Health Insurance

Taxable Health Insurance

Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Does not show up
Does not show up
Does not show up

Pretax Health Insurance

Taxability

FIT SS Med FUTA
Exempt Exempt Exempt Exempt

 

 

 

How it's reported on federal forms

941 940 W-2
Decreases boxes 2, 5a, 5c
Box 4 and 4a checked
Decreases boxes 1, 3, 5

Taxable or Pretax?

Select the option that applies to this insurance plan, as defined in your plan documents. If you don't have your plan documents, contact your plan administrator. Typically, premiums for cafeteria plans (Section 125 plans) can be paid for with pretax paycheck deductions for the purpose of federal taxes. State laws for cafeteria plans vary.

Note: If you select a different option than in your plan documents, you might be subject to penalties.

  • Taxable Insurance Premium: A premium that you subtract from your employee's paycheck after you've calculated and subtracted their taxes. This kind of premium has no immediate tax advantage.
  • Pretax Insurance Premium: Taxes are then calculated on the reduced salary amount. A pretax insurance deduction results in less income tax than would otherwise be the case.

Related:

IRS Publication 15

Dependent Care FSA

Taxability

FIT SS Med FUTA
Exempt Exempt Exempt Exempt

How it's reported on federal forms

941 940 W-2
Decreases boxes 2, 5a, 5c
Box 4 and box 4d checked
Decreases boxes 1, 3, 5, $ amount in box 10

Related:
Health Savings Accounts and other Tax-Flavoured Health Plans

Medical Expense FSA

Taxability

FIT SS Med FUTA
Exempt Exempt Exempt Exempt

How it's reported on federal forms

941 940 W-2
Decreases boxes 2, 5a, 5c
Box 4 and box 4a checked
Decreases boxes 1, 3, 5

Related:
Health Savings Accounts and other Tax-Flavoured Health Plans

Limited-purpose FSA

Limited-purpose FSA is setup and reported no different than a regular FSA(Medical Expense FSA) .

Related:
Health Savings Accounts and other Tax-Flavoured Health Plans

Health Savings Accounts (HSA)

A Health Savings Account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.

Taxable HSA

Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Does not show up
Does not show up
Does not show up

Pretax HSA

If the HSA is part of a cafeteria plan (Section 125 plan), set up the pre-tax HSA deductions separately from any cafeteria plan. Pre-tax deductions are exempt from federal taxes, but are taxable in some states and local jurisdictions.

Taxability
FIT SS Med FUTA
Exempt Exempt Exempt Exempt
How it's reported on federal forms
941 940 W-2
Decreases boxes 2, 5a, 5c
Box 4 and box 4a checked
Decreases boxes 1, 3, 5, $ amount in box 12 with code W
Related:

Retirement Plans

private insurance | private insurance Catchup

A 401(k) plan is a qualified plan that includes a feature allowing an employee to elect to have the employer contribute a portion of the employee's wages to an individual account under the plan. The underlying plan can be a profit-sharing, stock bonus, pre-ERISA money purchase pension, or a rural cooperative plan.
Generally, deferred wages (elective deferrals) are not subject to federal income tax withholding at the time of deferral, and they are not reported as taxable income on the employee's individual income tax return.
Traditional, pre-tax employee elective contributions are made with before-tax dollars.
Taxability:
FIT SS Med FUTA
Deferred Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Decreases box 2
Does not show up
Decreases box 1, $ amount in box 12 with code D, Retirement Plan checked
Related:

Simple private insurance | Simple private insurance Catchup

A subset of the 401(k) plan is the SIMPLE 401(k) plan. Just like the SIMPLE IRA plan, this is a plan just for you: the small business owner with 100 or fewer employees. However, just as with the SIMPLE IRA plan, there's a two-year grace period if you exceed 100 employees, to allow for growing businesses.

Taxability
FIT SS Med FUTA
Deferred Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Decreases box 2
Does not show up
Decreases box 1, $ amount in box 12 with code D, Retirement Plan checked
Related:

403B | 403B Catchup

A 403(b) plan (also called a tax-sheltered annuity or TSA plan) is a retirement plan offered by public schools and certain 501(c)(3) tax-exempt organisations. Employees save for retirement by contributing to individual accounts. Employers can also contribute to employees' accounts.
Taxability:
FIT SS Med FUTA
Deferred Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Decreases box 2
Does not show up
Decreases box 1, $ amount in box 12 with code E, Retirement Plan checked
Related:

SAR SEP | SAR SEP Catchup

A SARSEP is a salary reduction (SAR) simplified employee pension (SEP) plan set up before 1997 that includes a salary reduction arrangement. Under a SARSEP, employees can choose to have the employer contribute part of their pay to their Individual Retirement Account or Annuity (IRA) set up under the SARSEP (a SEP-IRA)
Taxability:
FIT SS Med FUTA
Deferred Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Decreases box 2
Does not show up
Decreases box 1, $ amount in box 12 with code F, Retirement Plan checked
Related:

Simple IRA | Simple IRA Catchup

A Simple IRA plan provides small employers with a simplified method to contribute toward their employees' and their own retirement savings. Employees may choose to make salary reduction contributions and the employer is required to make either matching or non-elective contributions. Contributions are made to an Individual Retirement Account or Annuity (IRA) set up for each employee (a Simple IRA).
Taxability
FIT SS Med FUTA
Deferred Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Decreases box 2
Does not show up
Decreases box 1, $ amount in box 12 with code S, Retirement Plan checked
Related:

After-tax Roth 403b

A designated Roth account is a separate account in a 401(k), 403(b) or governmental *457(b) plan that holds designated Roth contributions. Designated Roth contributions are elective deferrals that the participant elects to include in gross income. The plan must keep separate accounting records for all contributions, gains and losses in the designated Roth account.

Designated Roth employee elective contributions are made with after-tax dollars.
*We do not support 457(b) plans
 
Taxability:
FIT SS Med FUTA
Taxable Taxable Taxable Taxable
How it's reported on federal forms:
941 940 W-2
Does not show up
Does not show up
$ amount in box 12 with code BB, Retirement Plan checked
Related:

Other Deductions & Contributions

Cash Advance Repayment | Loan Repayment | Other after-tax deduction

Taxability

FIT SS Med FUTA
Taxable Taxable Taxable Taxable

How it's reported on federal forms

941 940 W-2
Does not show up
Does not show up
Does not show up

Related:
IRS Publication 15
Setup Cash Advance

Company Contributions

Taxability

FIT SS Med FUTA
Exempt Exempt Exempt Exempt

How it's reported on federal forms

941 940 W-2
Does not show up
Boxes 3, 4 and box 4c checked
If retirement contribution, Retirement Plan in box 13 checked

List of retirement contributions that affect box 13:

  • 401(K)
  • Simple 401(K)
  • Simple IRA
  • 403(B)
  • SAR SEP

Related:
IRS Publication 15
Setup Company Contribution

Pay types not supported

 

Non-supported pay types

State tax laws vary widely and aren't included in this article. For more information on pay types not included in this list, see below for Unsupported pay types and situation.

Following is a list of pay types and situations that are not supported:

  • Companies with 150 or more active employees
  • Owner draws
  • Negative checks
  • Blank check stock printing
  • Employee residence, work location, or business filing addresses outside of the U.S. We only support the 50 states and District of Columbia (no U.S. territories like Guam or Puerto Rico).
  • Roaming employees
    • These are employees with work location changes that have tax implications (state to state, for instance). We cannot support employees who have multiple work locations in the same quarter. Please note that this excludes an employee who's changed addresses permanently.
  • Union dues calculated by hours
  • Company contributions for union benefits calculated by hours.
  • Allocated tips
  • Company HSA Contribution if it is not reasonable to believe at the time of payment that the contribution will be excluded from the employee's income.
    • This type of contribution is subject to federal income tax withholding, Public Pension, Medicare, and FUTA tax, and must be included in wages reported on the employee's Form W-2 in boxes 1, 3, and 5. The contributions are also reported in box 12 with code W on the Form W-2.
  • Separate G/L accounts for federal taxes (for example, FIT, FICA and Medicare)
  • Certified payrolls
  • Stock shares received
  • Local tax courtesy withholding (employee having local tax withheld in resident state, but working in another state)
  • Statutory employees
  • Taxable S-Corp Medical Insurance when the same plan is not offered to all employees
  • Garnishments( A Levy, child support, spousal support or other custom garnishment. Please see  Compliance with wage garnishment orders