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FAQ: How do I tax employees for a health insurance incentive or wellness credit they received?

If you had an employee that received a health insurance incentive or wellness credit and your insurance company instructed you to include the amount of the incentive or credit as taxable wages for the employee, complete the following steps to include the amount in the taxable gross wages for the employee:

  1. In the Pay Codes option, set up a new pay code with Payment In Kind as the Pay Code Type and select only the applicable taxes in the Cross References List.
  2. Make an entry for the employee in a Pay Period Entries batch using the newly defined pay code and entering the dollar amount specified by your insurance company in the Dollars field.
  3. Include the Pay Period Entries batch containing the payment in kind entry in the next payroll.

By completing the steps above, the gross taxable wages for the applicable taxes will be increased for the employee by the specified amount, while the gross earnings will not be affected (the amount of the payment in kind is not paid to the employee, it just increases the taxable gross).