When adding or editing a money type in a payroll, click the “taxable” box to indicate if this money paid should be included in taxable income, or if it’s non-taxable income. If the money is not taxable, uncheck this box.
Examples of taxable income are:
Regular Earnings
Bonus
Commission
Tips (voluntary payments a customer chooses to pay a worker)
Service Charges or Auto-Gratuities (required charges, such as an 18% service charge added to a dinner check)
Severance Pay
Awards
Back Pay
Sick Pay, when the employee pays for a sick leave insurance policy with pre-tax dollars
To create a taxable money type go to Settings > Payroll > Hours & Money Types. On the Money Type section, click the +Add New link. Name your money type and be sure the box “Include as Taxable Income” box is checked. Click Save.
You can also make this money type frequently used or a repeating money type so it is used on each payroll. If this money needs a special box on the W2, you can indicate it here. For more information, check out our help article, “How to Set Up Money Types in Patriot Software.”
Examples of non-taxable income are:
Expense reimbursement
Tuition Reimbursement up to IRS Limits
Sick Pay, when the employee pays for a sick leave insurance policy with after-tax dollars
To create a non-taxable money type go to Settings > Payroll > Hours & Money Types. On the Money Type section, click the +Add New link. Name your money type and uncheck the “Include as Taxable Income” box. Click Save.
You can also make this money type frequently used or a repeating money type so it is used on each payroll. For more information, check out our help article, “How to Set Up Money Types in Patriot Software.”
See IRS Publication 15 – Employer’s Tax Guide for more reference on which income types should be taxed.