The IRS considers fringe benefits to be subject to Social Security, Medicare and Federal Withholding. See Employers Tax Guide to Fringe Benefits for a comprehensive list. Follow these steps to set up fringe benefits for tax purposes.
Adding a Non-Recurring Fringe Benefit
For this example, we are using gift cards which are a non-recurring fringe benefit.
Go to Advanced Payroll > Payroll Setup
- Click Benefits & Deductions tab
- Click Add New
- Enter Plan number (this is the order sequence for Benefits & Deductions. Usually it is the next number in the list)
- Enter the plan Description. It is recommended to use the value of the fringe benefit in the description, $25 Gift Card in this example.
- Vendor/Group/Split/Primary/Basis can be left blank
- BARS code can be left blank or be assigned to the distribution for Social Security & Medicare.
- Cap set to none
- Pay Item can be left blank
- Check SS/Med/FWT if desired as a reminder that it applies to all three but the settings do not have an effect on this item.
- Click Save
Click Settings tab
- Click Add New
- Enter Description this can be the same as the plan description
- Enter Taxable Basis the value of the gift card
- Click Save
If the fringe benefit will be recurring on every pay check, skip steps 14 & 16 and go to next step.
Click Pay Cycles Tab
- Click to highlight desired Pay Cycle
- Unselect desired benefit from Deductions
If this is a recurring fringe benefit then add it to the employees who are receiving it. If this is a non-recurring fringe benefit then add the benefit to employees that are receiving it or may receive it. By adding it to their profile and having the benefit turned off in the pay cycle, the fringe benefit can be added to a pay cycle when needed.
Adding a Reoccurring Fringe Benefit
Go to Advanced Payroll > Payroll Control Center
- Click Employees tab
- Click to highlight desired employee
- Click View
- Click Deductions & Benefits tab
- Click Add New
- Select desired Plan Name
- Select the Plan Category from the drop down
- Click Save
Repeat Steps 1-8 for each applicable employee.
- Create payroll as normal see Create Employee Checks
Steps 10-13 are only needed to add a non-recurring fringe benefit to the pay card.
- Go to the Benefits & Deductions tab
- Click Add New
- Click to select desired Plan
- Click Save
This does not create any employee or employer deductions. It is only creating a tax basis which can be seen in the adjustments tab.
If there are fringe benefits with the same description but different values, create separate benefits by repeating the processes above. This will make it easier to select the correct value when adding the benefit to the payroll.
