Salary Reduction

[Justine Loker]

Our church recently elected to participate in a cafeteria plan. We have employees that are purchasing additional insurance for their dependants out of their wages. How could we set this up in payroll if they are payed hourly. Before we elected to participate in the cafeteria plan our payroll was set up like this assuming Cathy made $140.

10 Cathy - wages 140 (All taxable)
70 Fed. With 15
75 State WH 4.20
80 Soc. Sec 8.68
81 SS Match 8.68
Medicare 2.03
86 Med Match 2.03
110 Health Insur 20.00

Gross pay would be $90.09. (140 - 15 - 4.2 - 8.68 - 2.03 - 20)

How can I keep the $20 from being taxed by Federal & FICA since we are participating in the salary reduction plan. Would I have to adjust the hourly wage total every week to show the subtraction of income that is the same amount of the health insurance? I think I am making this too hard. Please help if you have any ideas.

[Justine Loker]

Has anyone set up payroll where insurance premiums are not taxable?

[NeilZ]

Has anyone set up payroll where insurance premiums are not taxable?

Are these premiums that the church pays to the employee?? Then when you set up the payroll Item Descriptions you just set it up as income, but non-taxable.

If these are a 'before tax' deductition, there is a knowledge base article that covers a 401k and 403b deductions that can give you an idea on how to handle this:
http://www.powerchurch.com/support/answ ... icle_id=17

[Justine Loker]

Here is the problem I'm having. The church provides insurance for the employee but not their families. If they purchase insurance for their family, it is out of their wages. We are participating in a salary reduction plan which should be tax free income when using it for insurance. (This is how I understood the plan). The problem is when I set up item descriptions, I have the following: (Let's assume Bill makes 500.00 a week)
10 Bill - Wages - 478.00 I have box 1,3,5, and 16 marked
11 Bill- Insurance 22.00 I have no boxes marked
70 Federal WH -
75 State wh
78 SS
79 SS MATCH
80 MED
81 MED MATCH
101 Insurance Deduction 22.00

If we pay employees hourly, what is the easiest way to adjust the wages down to 478. Let's say Bill works 50 hours at $10 an hour. If I put in 50 hours, it would make his income 522.00 (with his insurance added in) the way I have it set up unless I manually subtract the insurance cost from his hourly screen and put the wages under salary. I may be making this way too hard. When we have salary employees, I deduct the insurance amount from their weekly pay and it doesn't change every week. With hourly employees, the total wage amount changes and if they have insurance they are purchasing, it has to be subtracted out of their wages. I will call anyone that thinks they can help me with this. Maybe I can explain it better in person. Thanks.