Understanding Tax Status Setup for Benefits
You set up tax information for a benefit so that the system properly calculates any taxes that must be withheld from an employee's pay as a result of the benefit. In some cases, you might need to identify a benefit, such as a company-paid life insurance policy, as a taxable cash benefit.
When you set up a benefit, you must indicate its effect on employees' gross and net pay. You must identify the benefit as:
Benefit |
Description |
|---|---|
Nontaxable cash benefit |
You set up a nontaxable cash benefit when the employer is providing a benefit to the employee that does not affect the employee's gross income. The cash benefit is added to the employee's net income as a net pay adjustment. An example of a nontaxable cash benefit is a moving allowance below the taxable minimum. |
Nontaxable noncash benefit |
You set up nontaxable noncash benefits when the employer is providing a benefit to the employee that is not taxed and is not transferable to cash, such as company-paid health insurance. The employee is not taxed for this benefit. |
Taxable cash benefit |
You set up a taxable cash benefit when the employer is providing a benefit to the employee that is taxed and is in the form of cash. An example of a taxable cash benefit is a reimbursement for moving expenses. |
Taxable noncash benefit |
You set up a taxable noncash benefit when the employer is providing a benefit to the employee that is taxed and is not transferable to cash. The benefit is added to an employee's gross pay, but it has no impact on the employee's net pay other than the tax withheld. An example of a taxable noncash benefit is the use of a company car. |