Reporting Non-Cash Taxable Benefits (NC3) on the Employee's W2
To include in last Payroll of the year
Using the PAYROLL/PAYROLL PAYMENTS - CURRENT or PAYROLL/PAYMENTS-FUTURE program, the amount should be entered using a pay type of Non-Cash Taxable Benefits Pay Type (NC3). This pay type represents one kind of non-cash earnings for the employee. This amount is taxed and is included as taxable wages but does not increase the employee's check in any fashion.
Federal, Ohio, City (if applicable) OSDI and Medicare tax amounts will be calculated. All of these will be treated according to the federal rules. The software provides the ability to withhold city tax on non-cash earnings. This can be activated by checking the "Tax Non-Cash Earn" field on the city tax record in the CORE/PAYROLL ITEM CONFIGURATION program.
Is not subject to Retirement.
The Non-cash Taxable Benefit amount will not be included in the gross pay amount, nor in the gross totals found on Pay Report or REPORTS/PAY AMOUNT SUMMARY REPORT OPTIONS. The Pay Report will provide a total figure of all non-cash earnings in the Pay Type Totals section. This extra total will help in balancing purposes. The Non-Cash Earnings will be included on the Pay Amount Summary Report under Grand Totals.
Taxable benefit will be added to the Quarter report>Totals Summary>Non-Cash Earnings amount in Other Pay and All Pay totals.
Taxable benefit will be added to the Quarter report>Totals Summary>Non-Cash Earnings amount.
If there are remaining payrolls to be processed in the calendar year, the Non-Cash Pay Type can be used.
Go to Payroll>Payroll Payments - Current or Payroll Payments - Future.
Click Create.
Employee - Select the appropriate employee from the dropdown.
Compensation - Select the appropriate compensation from the dropdown.
Description - NC3
Pay Type - Non-cash Taxable Benefit
Effective Date - Leave blank if wanting to be processed the next payroll processed. Otherwise enter a date inclusive of the pay period beginning and ending dates of the payroll you want the payment to be included in.
Units - 1
Rate - Enter the Non-Cash Taxable Benefit amount.
Applies For Retirement - Uncheck the checkbox.
Retire Hours - Leave blank.
Supplemental - Leave unchecked.
Supplemental Tax Option - None.
Click Save.
Complete the payroll process.
Examples:
Payroll Payments - Future:
Payroll Payment - Current:
If not included in Payroll but before running W2s
Medicare adjustments will need to be added. Detail instructions are below.
Taxable Benefits (NC3) does get added to the Quarter Report Totals Summary 'Non-Cash Earnings'.
If the 'Non-cash Taxable Benefit' pay type was not used during payroll processing, the Taxable Benefits (NC3) payment amount must be entered under the CORE/ADJUSTMENT JOURNAL using the Taxable Benefits Type in order for the Taxable Benefits (NC3) amount to show correctly on the W2 form. This amount would only be entered under the 001 Federal Payroll Item. This will update the total and taxable gross totals on the Federal, State, City (If applicable) OSDI and Medicare records during W2 Report. No manual adjustments are needed for the Gross and Taxable Gross amounts. See below for the Employee and Board Medicare withholding adjustments that will need to be created.
The following Core>Adjustments would need to be posted:
Go to Core>Adjustments.
Click Create.
Employee = Locate the employee by name or id.
Payroll Item = Federal Tax.
Type = Taxable Benefit
Transaction Date = Enter a date within the current posting period.
Amount = Enter the calculated Taxable amount ($100.00 in this example)
Description = Can be added if desired.
Click Save.
Effects on Quarter Report:
Taxable Benefit (NC3) Adjustment on the Federal Tax Payroll Item -($100.00 in this example).
Individual Employee *TD Taxable Wages
Deduction Items Summary
QTD and YTD Taxable x 1
Totals Summary>Non-Cash Earnings
A 'Difference in Adjusted Gross' will show for the NC3 payments on the Quarter Report.
Form 941 Line 2) QTD Taxable x 1
Form 941 Line 5C) QTD Medicare Taxable Wages x 1
City withholdings are based on how the Payroll Item Configuration>Tax Non Cash checkbox is marked.
If the Core>Payroll Item Configuration>Tax Non Cash Earn is checked and the Non-Cash Taxable Benefit (NC3) Type is processed through payroll or an Adjustment>Taxable Benefit is created, the City Total Gross and Applicable Gross are increased by the Taxable amount, the city tax is paid when the employee files their taxes
or
If any Core>Adjustments are entered involving non-cash earnings, the city tax will need to be calculated, the appropriate adjustments entered, and the appropriate payments processed.
If the Core>Payroll Item Configuration>Tax Non Cash Earn is not checked and the Non-Cash Taxable Benefit (NC3) Type is processed through payroll or an Adjustment>Taxable Benefit is created, the City Total Gross and Applicable Gross are not increased by the Taxable amount.
OSDI withholdings are based on the following:
When Taxable Benefits (NC3) Adjustment is added, each OSDI Payroll Items> Applicable Gross is increased by the Taxable Benefit amount. If an employee lived in multiple school districts throughout the year, the Applicable Gross for each OSDI Payroll Item will need to be calculated and Adjustments to reduce the OSDI's Applicable Gross accordingly should be entered. The Applicable Gross for OSDI Payroll Item is calculated by the following:
Cost Per Month = Total Taxable Benefit Amount/Number of Months
Cost Per Month X Total Months in School District
To create the necessary Core>Adjustments, do the following:
Click Create.
Employee = Locate the employee by name or id.
Payroll Item = Select each OSDI affected
Type = Applicable Gross
Transaction Date = Enter a date within the current posting period.
Amount = Enter the negative amount calculated above.
Description = Can be added if desired.
Click Save.
Repeat for each OSDI payroll Item Employee has
Regular Medicare
If Medicare Paid by Employee and Board, the Medicare withholding must be paid. Create adjustments for the Medicare payroll item(s). (Board will need to pay for both Employee and Employer portion of Medicare. If the district chooses, the employee can reimburse the district.)
If the employee is responsible for paying their portion of Medicare, the following adjustments will need to be created:
Go to Core>Adjustments.
Click Create.
Employee = Locate the employee by name or id
Payroll Item = Medicare Tax
Type = Amount Withheld
Transaction Date = Enter a date within the current posting period
Amount = Enter the amount owed for the employee withholding - (1.45 in this example)
Description = Can be added if desired
Click Save.
Click Create.
Employee = Locate the employee by name or id
Payroll Item = Medicare Tax
Type = Board's Amount of payroll item
Transaction Date = Enter a date within the current posting period
Amount = Enter the amount of owed for the board withholding - (1.45 in this example)
Description = Can be added if desired
Click Save.
Example of Regular Medicare calculations
Taxable Benefit cost is $100.00. Medicare Amount would calculate as $100.00 x .0145 = $1.45. Adjustments would need to be posted as follows:
$1.45 Amount Withheld for 692
$1.45 Board's Amount of payroll item for 692
These adjustment amounts will affect the Quarter report:
Individual Employee Contribution 692 - *TD Totals
Totals Summary>Non-Cash Earnings
A 'Difference in Adjusted Gross' will show for the NC3 payments on the Quarter Report.
Deductions Items Summary 692-Employee Contribution *TD Totals for Employee portion only x 1
Amount Withheld Adjustment on the Medicare Tax Payroll Item - ($1.45 in this example).
Form 941 Line 5C) QTD Employee’s Medicare Contributions x 1
Form 941 Line 13) Federal Withholding Deposits x 1
Board’s Amount of payroll item on the Medicare Tax Payroll Item - ($1.45 in this example).
Form 941 Line 5C) QTD Employer’s Medicare Contributions x 1
Form 941 Line 13) Federal Withholding Deposits x 1
Medicare Pickup
If the Medicare is fully board paid (referred to as Medicare Pickup), adjustments will need to be created. (Board will need to pay for both Employee and Employer portion of Medicare.)
Go to Core>Adjustments.
Click Create.
Employee - Locate the employee by name or id.
Payroll Item - Choose Medicare Tax.
Type - Choose Board’s Pickup Amount of payroll item.
Transaction Date - Enter or choose date from calendar.
Amount - Enter the calculated employee withholding being paid by the board. This amount will be included in the Medicare Pickup total and the Medicare Tax Withheld total on the employee's W2 - ($1.47 in this example).
Description - Can be added if desired.
Click Save.
Click Create.
Employee = Locate the employee by name or id.
Payroll Item = Medicare Tax.
Type = Board’s Amount of payroll item.
Transaction Date = Enter a date within the current posting period.
Amount = Enter the calculated board withholding - ($1.47 in this example).
Description = Can be added if desired.
Click Save.
Click Create.
Employee - Locate the employee by name or id.
Payroll Item - Choose Medicare Tax.
Type - Choose Applicable Gross.
Transaction Date - Enter or choose date from calendar.
Amount - Enter the amount of the difference in the original Applicable Gross - calculated Applicable Gross - ($101.47 - $100.00 = $1.47 in this example).
Description - Enter in a description (optional).
Check ‘Apply To Employer Pickup'
Check ‘Quarter To Date’ Box only
Click Save
The Amount Withheld is added to the Taxable Gross of Federal, Ohio, City (If Applicable) and OSDI to be taxed. It will not be added to Medicare Taxable Gross.
Example of Medicare pickup calculations
Taxable Benefit cost is $100.00.
$100.00 cost/ 98.55% = $101.47 Applicable Gross
$101.47 x .029 (.0145 x 2) = $2.94 Medicare Pickup Amounts
$1.47 for each the Employee (being paid by the board as pickup) and Employer amount.
$101.47 - $100.00 = $1.47 Applicable Gross Adjustment
$1.47 Is the amount of the Board Pickup Amount of the Payroll Item. This will update both Medicare Pickup for $1.47 and Medicare for $1.47 on the Employee's W2.
$1.47 Is the amount of Board's Amount of payroll item. This will update the 941 Quarter report 'QTD Employer's Medicare Contribution.'
$1.47 Is the amount of Applicable Gross. This will update the employee's W2 Taxable Gross for Medicare and Quarter report.
Also check the box ‘Apply To Employer Pickup’ and ‘Quarter To Date’ to apply this amount to the Employer Pickup for the employee
Adjustment records that need to be created:
Only for employees over $200,000:
This amount will only affect these lines on the Quarter Report:
Taxable Benefits Adjustment on the Federal Tax Payroll Item -($100.00 in this example).
Individual Employee *TD Taxable Wages
Totals Summary
A 'Difference in Adjusted Gross' will show for the NC1 payments on the Quarter Report.
Line 2) QTD Taxable Wages x 1
Line 5C) QTD Medicare Taxable Wages x 1
Board’s Pickup Amount Adjustment on the Medicare Tax Payroll Item - ($1.47 in this example).
Line 2) QTD Taxable Wages x 1
Line 5C) QTD Employees' Medicare Contributions x 1
Line 13) Federal Withholding Deposits x 1
Includes Board paid Medicare/FICA x 1
Picked up by board x 1
Board’s Amount of payroll item on the Medicare Tax Payroll Item - ($1.47 in this example).
Updates to the Quarter Report:
Line 2) QTD Taxable Wages x 1
Line 5C) QTD Employees' Medicare Contributions x 1
Line 13) Federal Withholding Deposits x 1
Includes Board paid Medicare/FICA x 1
Picked up by board x 1
Applicable Gross of payroll item on the Medicare Tax Payroll Item - $1.47 in this example).
Updates to the Quarter Report
Line 5C) QTD Employees' QTD Taxable Wages x 1
Only for Employee’s Over $200,000
Line5D) QTD Medicare Taxable Wages Subject To Additional Withholding
Only for Employee’s Over $200,000:
W2 Report - to remove ‘Warning: Possible Medicare discrepancy detected for amount over 200,000. Amount calculated = $xxxx.xx’
Board’s Pickup Amount of Payroll Item - YEAR TO DATE ONLY, on the Medicare Tax Payroll item -Example: $100 x .9% (0.009) = .90 cents (0.90)
Update W2 report for employee:
692 Medicare
Medicare Pickup