AFLAC Deduction Setup, Can't Get Taxes Right

[onemore4gsus]

We have two non-ministerial employees who signed up for hospital and accident insurance through AFLAC. These are Section 105 plans. These are employee voluntary deductions, not employer funds.

I set up the AFLAC Item Description for the deduction as:
Type: Other Deduction
Tax Options: More Options
This deduction...: no check marks in any of the boxes (Fed, Local, Med, SS, State)

BUT Power Church is still taxing the full "Salary" amount. I surmise that is because I haven't told PC+ not to deduct from part of that salaried amount.

Do I need to:
1) Create another "Salary" line that is non-taxable and call it "AFLAC Pre-tax Salary"
2) Add the pre-taxed deduction amount to this new Item Description in each EE Pay Items list as Income
3) Deduct the same amount from the original "Salary" Item Income line

for it to properly calculate the FICA, State, and Fed tax?

thanks.

[NeilZ]

We have two non-ministerial employees who signed up for hospital and accident insurance through AFLAC. These are Section 105 plans. These are employee voluntary deductions, not employer funds.

I set up the AFLAC Item Description for the deduction as:
Type: Other Deduction
Tax Options: More Options
This deduction...: no check marks in any of the boxes (Fed, Local, Med, SS, State)

BUT Power Church is still taxing the full "Salary" amount. I surmise that is because I haven't told PC+ not to deduct from part of that salaried amount.

Do I need to:
1) Create another "Salary" line that is non-taxable and call it "AFLAC Pre-tax Salary"
2) Add the pre-taxed deduction amount to this new Item Description in each EE Pay Items list as Income
3) Deduct the same amount from the original "Salary" Item Income line

for it to properly calculate the FICA, State, and Fed tax?

thanks.

If these are indeed, pre-tax deductions not taxed at all, you actually have the item description setup correctly EXCEPT .. for the Tax Options.

If these options should not be taxed by Federal, State or Local taxes, then just change the tax option to Pre-tax deduction the system will then deduct the amount from the taxable amount before it calculates the taxes for any locality.

However, if this is not considered a pre-tax deduction by your state or local authorities, then in your current setup, CHECK the boxes for Federal Withholding and Medicate, and LEAVE BLANK the tax locality that taxes this portion of the income.

Note the text next to those boxes: This deduction reduces the TAXABLE INCOME for which types of taxes. Since you have none of the boxes checked, the system says 'OK, this deduction does not reduce the income, so I'll compute the taxes on the full amount".

Does this help ??

Disclaimer I am not an accountant, and cannot say whether these 'Section 105' deductions are tax free or not. However, based on what I read about Section 105 plans, I would talk to a tax accountant. All references to Section 105 plans I've found refer to employers' reimbursing employees for their insurance payment in their salary, thus allowing the employee to purchase a plan that they feel best suits their requirements.

I did not see any reference to any employer contributions as part of salary to this, so any suggestions listed above are entirely based on the information given.

[onemore4gsus]

Thank you, Neil.

I will change that to Pre-Tax and check it against my spreadsheet tomorrow.

Fortunately, the plans EEs chose are AFLAC Cafeteria Section 125 (not 105--sorry 'bout that) plans, whereas AFLAC Short-Term Disability and Life Insurance are not. Glad none of them opted for a "mixed-bag" of pre- and post-tax.

[onemore4gsus]

This worked perfectly, Neil. Thanks so much for your expertise.

We have two non-ministerial employees who signed up for hospital and accident insurance through AFLAC. These are Section 105 plans. These are employee voluntary deductions, not employer funds.

I set up the AFLAC Item Description for the deduction as:
Type: Other Deduction
Tax Options: More Options
This deduction...: no check marks in any of the boxes (Fed, Local, Med, SS, State)

BUT Power Church is still taxing the full "Salary" amount. I surmise that is because I haven't told PC+ not to deduct from part of that salaried amount.

Do I need to:
1) Create another "Salary" line that is non-taxable and call it "AFLAC Pre-tax Salary"
2) Add the pre-taxed deduction amount to this new Item Description in each EE Pay Items list as Income
3) Deduct the same amount from the original "Salary" Item Income line

for it to properly calculate the FICA, State, and Fed tax?

thanks.

If these are indeed, pre-tax deductions not taxed at all, you actually have the item description setup correctly EXCEPT .. for the Tax Options.

If these options should not be taxed by Federal, State or Local taxes, then just change the tax option to Pre-tax deduction the system will then deduct the amount from the taxable amount before it calculates the taxes for any locality.

However, if this is not considered a pre-tax deduction by your state or local authorities, then in your current setup, CHECK the boxes for Federal Withholding and Medicate, and LEAVE BLANK the tax locality that taxes this portion of the income.

Note the text next to those boxes: This deduction reduces the TAXABLE INCOME for which types of taxes. Since you have none of the boxes checked, the system says 'OK, this deduction does not reduce the income, so I'll compute the taxes on the full amount".

Does this help ??

Disclaimer I am not an accountant, and cannot say whether these 'Section 105' deductions are tax free or not. However, based on what I read about Section 105 plans, I would talk to a tax accountant. All references to Section 105 plans I've found refer to employers' reimbursing employees for their insurance payment in their salary, thus allowing the employee to purchase a plan that they feel best suits their requirements.

I did not see any reference to any employer contributions as part of salary to this, so any suggestions listed above are entirely based on the information given.