How To Set Up Health Insurance Deduction In QuickBooks Desktop

The QuickBooks software allows you to set the deductions related to the health insurance contribution and they get updated automatically in the insurance plan of the employee.

What are Health Insurance Contributions and Deductions in QuickBooks Payroll?

In QuickBooks Payroll, you can easily establish health contributions and deductions for your employees’ payroll. To get started, ensure that you have already processed their paychecks before setting up these contributions. Once you have added your employees to the payroll, you can proceed to include each contribution and deduction in their respective paychecks.

When using QuickBooks Payroll, you have the option to select the health insurance benefits you wish to provide to your employees. There are several national insurance options available for your employees to choose from, each offering multiple plans or schemes that cater to their interests.

To set up deductions in QuickBooks Payroll and automate payment for the insurance plan on behalf of your employees, you need to navigate to the Paycheck section. To learn more about setting up health insurance contributions and deductions in QuickBooks Payroll, please continue scrolling for detailed instructions.

How to Set Up Health Insurance Deduction In QuickBooks Payroll?

Follow the steps given below:

• First of all launch your QuickBooks Desktop Software.
• Then tap on the employees tab.
• Next, you need to tap on the name of the employee and right-click on it to choose the edit command.
• Now move to the Deduction section and look for the pencil icon there as soon as you find the pencil icon tap on it and make the changes in deductions.
• Also, you can tap on the Add new deduction button if you want to add the deductions for that employee.
• Now tap on the deduction drop-down list and choose the new deduction option.
• After that choose the health insurance option you can select the type of insurance from the drop-down list like Dental insurance, Medical insurance, etc.
• Then type in the information like the name of the health insurance provider.
• Further, choose the percentage of the gross income or the amount, you can also change the amount while creating the paychecks.
• Once you have done all this now you can choose how the premium is taxed.

Note: You should always select the type of premium according to the plan documents you have.

Read this: Set Up Health Reimbursement Arrangement in QuickBooks

How to Add, Edit, and Track Your Insurance Benefit Plan in QuickBooks?

When it comes to your insurance benefit plan in QuickBooks Online Payroll and QuickBooks Desktop Payroll, it is important to understand the process of setting up and managing payroll items. Additionally, you should be familiar with how to appropriately track and tax these items. In some cases, you may need to set up specific items in QuickBooks to effectively monitor insurance benefits offered by your company.

Follow the steps below:

Step 1: Choose Which Health Benefits to Set up

Plans for Section 125 (Cafeteria Benefit Plans)

• Health Insurance (Taxable or Pre-Tax)
• Dental Protection (Taxable or Pre-Tax)
• Vision Protection (Taxable or Pre-Tax)

HSA Plans

• Taxable
• pre-tax
• company

Flexible Spending Accounts (FSA)

• Dependent Care FSA: Used for dependent child or adult care benefits.  
• Med Care Flex Spend/Medical Expense FSA: Used for medical expenses like copays or prescriptions.

Step 2: Set up a Vision, Medical, or Dental Insurance Payroll Item

As soon as you know the details of your provider’s insurance benefits, you can add a Payroll Item for Medical, Vision, or Dental Insurance.

Get more information about Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs).

Note: For any other pre-tax insurance not included in QuickBooks, use the vision insurance item.

• Select “Employees” and then “Payroll” from the main menu.
• Choose the employee for whom you want to start or edit a deduction or contribution.
• Click on “Start” or “Edit” to begin or modify the process.
• Select “+ Add Contribution/Deduction.”
• In the “Contribution/Deduction” section, choose “Health insurance.”
• From the options provided, select either “Dental Insurance,” “Medical Insurance,” or “Vision Insurance.”
• Enter the provider’s name in the “Description (Appears on a Paycheck)” field.
• After selecting either a flat amount or a percentage of gross pay, enter the amount or percentage per paycheck.
• Choose whether the insurance premiums should be treated as pre-tax or taxable.
• If your company offers a matching contribution, add the amount or percentage for the company contribution per paycheck.
• Once you have finished, select “Save” and then click on “Done.”

Read this: How to Set Up Beginning Balances in QuickBooks

How to Set up the Health Insurance Items in QuickBooks

Step 1: Set up the Health Insurance Items

Create a Deduction Item if your employee contributes to their health insurance plan. Create a Company Contribution if your company also contributes.

Set up a Health Benefit Insurance Deduction Item

• Go to the “Lists” menu and select “Payroll Item List.”
• Choose “New” from the “Payroll Item” drop-down menu.
• Select “Custom Setup.”
• Choose either “Deduction” or “Company Contribution.”
• After entering the item name (e.g., medical, vision, or dental), click “Next.”
• Provide the agency’s name, account number, and recipient of the responsibility payment. Click “Next.”
• Select “Premium Only/125” for pre-tax deductions or “None” for after-tax deductions as the Tax Tracking Type.
• Click “Next” three times.
  • In the “Gross vs. Net” window, choose “Net Pay” for the “None” Tax Tracking Type and click “Next.”
• Leave the default rate and limit fields empty. You can add the rate and limit once the item is assigned to an employee profile.
• Finally, select “Finish.”

Set up Company Contribution Item

• Go to the “Lists” menu and select “Payroll Item List.”
• From the drop-down menu, choose “Payroll Item,” and then click on “New.”
• Select “Custom Setup,” and click “Next.”
• Choose “Company Contribution,” and click “Next.”
• Enter the item name.
• Select or add the name of the agency that will receive payment for the liability, enter the account number, and choose the expense account to track the item. Click “Next.”
• Set the tax tracking type as “None.” Click “Next” three times.
• Leave the default rate and limit fields empty. You can add the rate and limit once the item is assigned to an employee profile.
• Finally, select “Finish.”

Also, read this: How to Set up Automatic Invoices in QuickBooks

Step 2: To the Employee Profile Add the Item

• Click on “Employee Center” under the “Employees” menu.
• Select the employee you want to edit and click on “Payroll Info.”
• Navigate to the section for “Additions, Deductions, and Company Contributions.”
• Add the relevant items related to health benefit insurance.
• Enter the limit and the amount per pay period for the insurance item.
• Once you have entered the necessary details, choose “OK.”

Step 3: Check the Items Inclusion on Your Employees Paychecks

You should include these benefits in your employees’ paychecks every time they are paid. Here are the instructions for updating or removing an insurance item:

QuickBooks Desktop Payroll

• Go to the “Lists” menu and select “Payroll Item List.”
• Right-click on the item you want to modify and choose “Edit Payroll Item.”
• Make the necessary changes on each window as required.
• Finally, select “Finish” to save the modifications.

To remove a payroll item in QuickBooks, follow these steps:

• Go to the “Lists” menu and select “Payroll Item List.”
• Right-click on the item you want to remove and choose “Edit Payroll Item.”
• Select “Payroll Info.”
• In the “Additions, Deductions, and Company Contributions” column, select the amount (if any) and the item name, then press the “Delete” key on your keyboard.

QuickBooks Online Payroll

• Select “Employees” and then go to “Payroll.”
• Choose the employee for whom you want to start or edit a deduction or contribution.
• Click on “Start” or “Edit” to begin or modify the process.
• If you wish to modify a contribution, click on the edit icon (represented by a pencil ✎) next to it. If you want to delete a contribution, choose the trash bin icon.
• Once you have made the necessary changes, select “Save” and then click on “Done.”

Need Professional Help?

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Frequently Asked Questions

Q 1: How to enter a deduction in your QuickBooks account?

Ans: For adding the new deductions:

• In the deduction section, click on the + sign to add a new deduction
• Click on the drop-down menu of deduction/contribution
• Then select the new contribution or deduction
• You have to choose the type of deduction from the drop-down icon
• Mention the name of the provider
• Select the amount or the gross pay
• Then click on the Done button.

Q 2: How to edit a deduction that already exists?

Ans: Follow the steps below:

• Under the option “Does this employee have any deductions”
• You have to click on the Edit option that is shown in front of the deduction that you want to edit
• Now, do all the changes that are required
• Click on the OK button and then click on the Done.

Q 3: What are the deduction options for the insurance plan?

Ans: There are 2 options that you have to select the option mentioned in your documents. These options are:-

• Taxable insurance premium
• Pre-tax insurance premium.

Q 4: How do I add health insurance deductions in QuickBooks desktop?

Ans: Follow the steps below:

• Select the employee you want to modify.
• Go to the “Payroll Info” section.
• In the section labeled “Additions, Deductions, and Company Contributions,” add the health benefit insurance items.
• Enter the amount per pay period for the insurance item.
• Specify the limit, if applicable.