Fringe benefits are considered non-cash compensation and are taxed as regular wages. These taxable "wages" are called imputed pay. Examples:
If you're unsure if you need to enter imputed pay, we suggest you speak with an accountant to find the correct classification for your situation.
Check out our reimbursements article if you need to reimburse employees for expenses. Keep in mind that reimbursements and expense reimbursements are not taxed, and therefore not reported as regular wages.
Imputed pay is added to an employee's gross wages for taxability purposes only. It will not be included in the employee's net pay, since this benefit was already compensated in another form.
Imputed pay is considered non-cash compensation that is taxable, also known as fringe benefits. Add imputed pay to your payroll so that it's properly reported.
The next time you run payroll, we'll record the company contribution for imputed pay and tax the amount as part of the employee's gross wages. It will not be paid out to the employee since this benefit was already compensated in another form.
To make sure your tax filings are as accurate as possible, we recommend adding in all fringe benefits (like gym stipends or memberships, relocation reimbursements, company car, etc.) before we file your quarterly or annual taxes.
To add missing fringe benefits (or, "imputed pay") and record them for the year, follow these steps:
After you run an off-cycle payroll with the benefit set up, we’ll debit your company's account for any associated payroll taxes. This debit will include employer taxes as well as employee taxes; as a result, your employee(s) will owe you for their portion of the taxes we debit.
To recoup these funds from the employee(s):
Once you've set up the benefit for imputed pay, run payroll and see the benefit amount on your employee's paystub. Imputed pay will appear 3 times: