Create a Fringe Benefit Check

A fringe benefit is a form of payment for services by an employer to an employee beyond the stated pay. Fringe benefits for employees are taxable wages unless specifically excluded by an Internal Revenue Code. Examples of a fringe benefit include but are not excluded to: personal use of a company-owned vehicle; reimbursed moving expenses; health insurance paid to a shareholder (2% or more) in an S corp.

Note: Be sure to enter any fringe benefit pay adjustment BEFORE rolling the calendar year for the Payroll system. Otherwise, the adjustment will not be included in the appropriate year's W-2 totals.

The following is an example of how to record a fringe pay for the personal usage of a company vehicle. This can be handled as a year-end adjustment to the employee's wages using a hand-written payroll check. The fringe pay will be automatically included as part of the Gross Wages as well as all of the Subject Wages for each tax. If the fringe pay is not subject to a specific tax, change the subject wage amount as applicable. (To change the subject wages, you must enable the 'Override Auto Tax Calculations' option found on the Fed Tab of the employee file.) Please check with your company's CPA about which taxes may be applicable before processing the check.

In the Payroll > Properties option, select the Misc Pays / Deds Tab and set up a miscellaneous deduction to use as an offset to the fringe benefit pay. You may want to set the deduction description to AutoFringe or something similar as this description will appear on the payroll checks. This deduction can be linked to your auto expense account so the deduct amount offsets some of the total auto expenses for the year.

2.	Select the Handwritten Checks option in the Payroll module. Please refer to the handwritten check documentation for basic instructions on how to enter handwritten payroll checks. The following fields will be unique for the fringe benefit entry:

•Check Number - Since this is not an actual check, you may wish to enter a unique check number series for the fringe benefit checks.

•Payroll Periods - Enter the period beginning and ending dates (you may wish to use the last week of the payroll year).

•Payroll Tax Deductions - These fields represent the employee deductions only; they do not include the employer's portion of the taxes. Because this is a hand-written payroll check, AccuBuild will not automatically calculate the payroll tax amounts for you. Be sure to check with your company's accountant before calculating any of the taxes on this check as this pay amount may be exempt from certain taxes. If taxes are due on the fringe benefit amount, then offset the amount by reducing the state and federal withholding taxes. For example, an employee is to receive an adjustment for fringe benefit pay in the amount of $1,000.00. Per the company's CPA, the amount is subject to all taxes except state and federal withholding. Therefore, the taxes must be calculated for FICA, FUTA, SDI, SUI, and ETT (as applicable to your state). First, verify whether the employee has met any of the tax limits. Remember that the FICA tax is a combination of social security and Medicare taxes, and that the Medicare portion does not have a wage limit. If the employee's year-to-date earnings have met the social security wage limit, and the Medicare rate is 1.45%, then $14.50 will be entered as the amount of Medicare tax for this check. But due to the fact that the net check amount must be zero, a credit amount of ($14.50) must be entered in the federal withholding field. The same process would be followed for each state tax but the cumulative adjustment would be made to the state withholding field.

3.	Select the timecards button and select Trans code ' 70 – Fringe Benefit Pay '. Enter the amount of the fringe benefit pay. The rest of the timecard entry fields may be skipped.

Remember, the employee's default union code and workers comp code will be automatically entered in this transaction. Check with your company's CPA to verify whether the fringe benefit amount should be subject to union and workers compensation insurance accruals.

If the employee has any automatic pays or deducts in their employee file, then these entries will automatically be added to the list of timecard entries. These entries should be individually deleted. Simply select the entry in the browse screen and select Delete.

4.	Select Add and select the Trans code that represents the AutoFringe deduction (61 through 66). Enter the amount of the fringe benefit pay LESS the taxes, select Save and then Close the timecard entry screen.

Select Process to post the entries through the accounting system. If the Process button is not enabled, then make sure that the calculated net amount of the check is equal to the check amount that you entered. Remember, the check amount should be zero. During the posting process, the system will calculate the employer's portion of the payroll taxes.

If you enabled the override of the automatic tax calculations in the employee file, then you will be able to change the tax amount and the subject wage amount at this time.

6.	W-2 Information - The amount of the fringe pay can be printed automatically in Box 14 of the W-2. Go to Payroll > Employees > Fed Tab > Box 14 Info, click the Fringe Benefit Pay option and enter a description of the fringe pay.

Please note: When you generate the W-2s through Aatrix (Payroll > Tax Forms / E-File / W-2s), the system will use the Subject Wages for federal and state wages, NOT the Gross Wage amount. If you have pre-tax deductions such as for a 401k, then the Subject Wage amount will be lower than the Gross Pay amount. If you do not have pre-tax deductions, then the Subject Wage will be the same as the Gross Pay.