P-4470 Handling automobile or life insurance compensation.
DATE: December 13, 1996
If an employer pays for an automobile that the employee uses for
business or if the employer pays for certain life insurance policies
for the employee, the employee is obligated to pay tax on a portion of
the value of these benefits. How is this accomplished?
In concept two things must be achieved:
1. The taxable value must be added to the employee's payroll.
2. This added value (above) must be neutralized to zero so
that the employer does not pay the automobile benefit twice.
Step 1. Set-up the AUTO ADDITION and/or INSUR ADDITION earning/deduction
table as appropriate, and also the DEDUCTION table file records:
Main Second Affects Include
Key Key Description Shifts In Gross Fed FICA ST City
------ ------ --------------- ------- -------- --- ---- -- ----
31-54* AUTOMA AUTO ADDITION N Y Y Y Y Y
31-54* INSURA INSUR ADDITION N Y Y Y Y Y
31-54* DEDUC DEDUCTION N N N N N N
(E)arn W2 Code
Addition/ (B)enefit G/L for
Deduction Limit Basis (W)itholding Account Box 13
--------- ----------- ------------ ----------- ------
Auto Addition: A Y B leave blank
Insur Addition: A Y B leave blank 02
Deduction: D Y B leave blank
* You may use any number within the 31-54 range.
Step 2. Use the ACCUMWRK program to enter the taxable amounts:
Method 1 The preferred method is to add the taxable compensation
to the employee's regular payroll check.
In the ACCUMWRK program enter the taxable amount in
both AUTOMA and DEDUC (or INSURA and DEDUC).
(NOTE: If you only want to deduct FICA and no other taxes
from the automobile and insurance amounts
then the AUTOMA and the INSURA table file records should be set
before ACCUMWRK to N Y N N for Fed, FICA, ST, City
AND SET BACK to Y Y Y Y after you print the checks.)
Method 2 An alternate method is to create a compensation check
netting out to zero. This method causes the employer's
FICA to be under reported.
1. In the ACCUMWRK program set Tax Frequency to 'N'(no taxes).
2. Enter the taxable amount in both AUTOMA and DEDUC.
At this point the FICA becomes the facility's responsibility.
Prior to the end of the year deduct the appropriate FICA amount
from the employee's check.