Taxable Insurance Premium

[emarino]

We have an employee who has individual health insurance and the church is paying the monthly premium to the insurance company. Under the Affordable Care Act this payment is taxable income, so I would like to show the item in the PowerChurch Payroll module as income and also withhold the appropriate taxes. The problem I'm having is that when I create the income item, PowerChurch wants an expense and a cash account for the insurance premium. The payment is not made to the employee, nor is it made when the pay check is issued, so it would not be appropriate to record the expense and cash amounts on the check. I merely want the premium recorded as income and I want to take withholding from the employee. Does anyone know of a way to do this? I hope I explained myself clearly.

thanks,

Ed Marino
Pepperell Christian Fellowship

[NeilZ]

We have an employee who has individual health insurance and the church is paying the monthly premium to the insurance company. Under the Affordable Care Act this payment is taxable income, so I would like to show the item in the PowerChurch Payroll module as income and also withhold the appropriate taxes. The problem I'm having is that when I create the income item, PowerChurch wants an expense and a cash account for the insurance premium. The payment is not made to the employee, nor is it made when the pay check is issued, so it would not be appropriate to record the expense and cash amounts on the check. I merely want the premium recorded as income and I want to take withholding from the employee. Does anyone know of a way to do this? I hope I explained myself clearly.

thanks,

Ed Marino
Pepperell Christian Fellowship

Ed .. which version of Powerchurch are you using? Under v11.x, you can create a payroll item description of type Taxable Benefit
to cover the requirement to show the benefit for tax calculation, pay stub & W-2. You then need to create another item description of type Employer Liability to reflect the amount that must be expensed by the church, and set aside in a liability account to pay later. Under the employer liability I'm fairly sure you leave the non-tax item box checked, as any employer tax is covered under the pay calculations for the taxable benefit pay item.

So there are two item descriptions you need to do. Then add the pay items to the employer's record under Maintain List of Employees. You then enter the amount you pay in the item on that employee's item list. If the employee gets paid twice a month, you can divide the amount by 2 so you don't have to worry about adding them on one pay period and not the other.

[beas]

Ed,

You might want to also be careful about "reimbursed health insurance premiums" under the ACA even though you're showing it as taxable income. I'm certainly not an expert, but there are some problems with doing this as just a straight reimbursement without a "plan" being in place, yada, yada. Just food for thought. The ACA is creating problems that we have never heard of, so watch for all of the gotchyas.

[emarino]

Thanks for the help. Your suggestions seem to work fine.

As for ACA, it has caused us a lot of aggravation. Up until this year, individual health insurance plans paid for by the employer were considered non-taxable, but no longer. So, as you say, we needed to institute a group insurance plan in order to provide non-taxable benefits. Unfortunately, payments for Medicare plans are always considered individual plans, and therefore are taxable to the employee.

Ed Marino
Pepperell Christian Fellowship