How to record employer paid health insurance in quickbooks online

If you own a small business that offers group health insurance to employees, you likely pay a portion of the employee’s premium while the employee pays the remainder. Each pay period, after making payroll deductions from employees’ paychecks, you pay wages and salaries and close out the payroll. You likely pay insurance premiums to the carrier monthly and make the necessary accounting entries on a monthly basis as well. The latter requires you to post health insurance premium payments to the general ledger, which houses all financial transactions that flow through the business.

1. Record your gross payroll for the month as a debit to the wages and salary expense account. This shows the amount of your entire payroll before any liabilities or deductions occur.

2. Post payroll taxes and garnishments withheld from employees’ paychecks for the month as a credit to the individual accounts in the general ledger. Taxes include federal income tax, Social Security tax, Medicare tax, and applicable state and local income taxes. Garnishments include wage withholding orders, and child support and alimony withholding. These payables are subtracted from the gross payroll to equal the net payroll if there are no other liabilities, including health insurance.

3. Enter employees’ withholding for health insurance as a debit to the health insurance expense account, if applicable. This process lowers the amount paid to the insurance carrier by the withholding amount to show the company’s total expense for health insurance. It also shows the net payroll after health insurance premiums are deducted.

1. Open Quickbooks desktop and click on the Lists menu and select Payroll Item List.
   1. Note: If payroll is not turned on in your Quickbooks file, then you will not see the Payroll Item List selection.
2. You will need to create a new payroll item for the employer contribution portion of an employee’s health insurance plan, so to do this click on Payroll Item at the bottom of the screen, or simply select Ctrl+N.
3. Select Custom Setup and click Next.
4. Select Company Contribution and click Next.
   1. Note: Be sure to not confuse company contributions with employee deductions.
5. Enter a name for your new payroll item, such as Health Ins. Contribution and click Next.
6. Choose the vendor name whom your health insurance premiums will be paid to and an account number identifier if applicable.
7. Select the Payroll Liability account where the health insurance employer contributions will be tallied up for later payment.
   1. Note: This selection is important because this is the liability account where health insurance premium payments will be applied against for future bookkeeping.
8. Select the Payroll EXPENSE account where the health insurance expense costs will show for your company on the Income Statement.
   1. Note: It is important to not confuse the payroll liability and payroll expense accounts in this section of the payroll item setup wizard.
9. Click Next.
10. For the Tax Tracking Type, choose Health Coverage Cost.
    1. Note: This selection is important because this information will be reported on the employee’s W-2 form.
11. Click Next.
12. Click Next. Note: You should not need to change anything in the Taxes section of this wizard.
13. If you plan on having the payroll software calculate the health insurance contributions costs based on a manual quantity you enter in on EACH PAYCHECK or based on the employee’s hours worked on EACH PAYCHECK, then choose one of these selections.
    1. Note: Most of the times you probably will select Neither as this amount probably will be preset within each employee’s payroll profile, either as a flat amount or a percentage of wages.
14. Click Next.
15. Enter a Default Rate & Limit only if you want this information to be the company default choices for all employee profiles.
    1. Note: Most of the times you probably will want to leave this section blank as it is most accurate to simply set up the actual amounts manually within each employee’s profile, especially for employees that choose not to have employer-sponsored health insurance.
16. Click Finish.

Thanks for joining this thread, @tahoeblue08.

I know you’ve already accessed the employee’s profile, let’s open it again and then go to the You can also pay section to check for the S-Corp 2% Health Insurance pay type. Here’s how:

1. Tap the Workers menu to choose the Employees tab.
2. Selecting these options will open to the My payroll page. From there, click on the employee’s name to view its profile.
3. Hit the Pencil icon for Pay under Employee details.
4. Go to the How much do you pay section and then click on the + Add additional pay types link.
5. Mark the box for S-Corp Owners Health Insurance under You can also pay.
6. Click on Done to save the changes.
   

However, if the payroll item is still missing, login to your account using the incognito mode or private browsing. When using these sessions, none of your information is saved or tracked along the way.

Follow the keyboard shortcuts below to open a private browser:

• Google Chrome: press Ctrl + Shift + N
• Mozilla Firefox: press Ctrl + Shift + P
• Internet Explorer: press Ctrl + Shift + P
• Safari: press Command + Shift +N

If you’re able to see the S-Corp Owners Health Insurance box, switch back to the regular browser and clear its cache to start fresh. This process also boosts its overall functionality.

For additional resources, here’s an article with detailed information about the supported pay types in QuickBooks. It also provides a quick overview of how it's reported on the tax forms: Supported pay types. 

You’re always welcome to visit the Community if you any questions about QuickBooks. Please know I’ll be right here to make sure you're taken care of.

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