What This Does

  • Creates a deduction to use for a Non-Cash Fringe Benefit (most common example is personal use of an employer provided vehicle), and increases taxable wages to report on Form W2.
  • Creates a deduction to use for a Cash Fringe Benefit (most common examples are cash provided to the employee to help pay for benefits or auto allowance for a personal car not provided by the employer), and increases taxable wages to report on Form W2.
  • Creates a deduction to use for a Non-Taxable Fringe Benefit under an accountable plan (allowances or reimbursements paid to employees for job-related expenses), and is excluded from wages and is NOT subject to withholding or reported on Form W2. Additional information and a complete list of all Non-Taxable Fringe can be found on the IRS Website.

Best Practice

  • Rather than creating a new deduction/benefit from scratch, RDA strongly recommends that whenever you set up a new Deduction Description, you select an existing deduction/benefit that is most similar to the one you are creating, so that you can use it as a template upon which to build your new benefit. As a general rule, try to select one that has the same Deduction Type and W2 Deduction Type as the one you are creating.

Add Non-Cash Fringe Benefit Deduction Description

  • Go to HR → Payroll → Setup → Deductions → Deduction Descriptions
  • Find an existing deduction/benefit that is most similar to the one you are creating. If you do not already have a Deduction Description with the Deduction Type of FRINGE or FRINGE-CASH, try to find an after-tax deduction with a W2 Deduction Type of Non-W2.
  • Click Select to open that deduction
  • Override the fields as shown below:
FIELDSOpt.Rec.Req.Description
Deduction Description ID——♦Name the benefit appropriately (Example: Non-Cash Fringe Benefit, or more specifically, Personal Use of Employer Car)
Short Description—♦—The Short Description will appear on the employees' checks (if the GSV is set to print the Short Description instead of the Deduction Description ID) so make sure it will be meaningful to the employees (first 9 characters prints on pay stub)
Type Tab
FIELDS
Opt.
Rec.
Req.
Description
Deduction Type——♦Select FRINGE; this is extremely important, as it drives the benefit's taxability
Vendor ID——♦Must assign a Vendor ID; can use a Dummy Vendor or one for the organization (no check will be created regardless)
W2 Deduction Type——♦Select Non-W2; there is not a separate W2 box for fringe benefits, however, the amount of the benefit will be included in the employees' taxable earnings in Boxes 1, 3, 5 & 16; OR Select FRINGE BENEFIT (if you include 100% of the annual lease value of a vehicle in the employee's income; in this case the amount must appear in Box 14 of the W2)
Compute Tab
FIELDS
Opt.
Rec.
Req.
Description
Compute Type    
——
♦
Select Flat Amount (and $0.00 in the corresponding amount field)
Flags Tab
FIELDS
Opt.
Rec.
Req.
Description
Active
—
—
♦
Select Boolean to activate deducation (This is the only flag to select in this first section)
Expense
—
—
♦
Do NOT select boolean (leave blank), since this benefit should NOT be expensed
Base Pay    
—
—
♦
Select all three booleans to include all rate types
Nothing——♦Select boolean to not block any rates
Description Tab
FIELDS
Opt.
Rec.
Req.
Description
Description—♦—Enter a Description for this benefit that is meaningful and describes the purpose of the deduction

Table Name, Computation, Rate Selection, Gross Amount, and Affect Select Tabs

  • REVIEW the Data on all of these Tabs to ensure nothing needs to be Added, Changed, or Removed
  • Click Save
  • On the Type Tab ~ Click Accounts to set up the Deduction Account for expensing a non-cash fringe (An existing employer paid deduction can be used as a template; Once existing account is selected, pull in the new Deduction ID, type in appropriate object code and make sure Amount Withheld is 0)
  • Click Personnel Deductions

Add the one-time or recurring benefit to each applicable employee. 

  • Click the Add button on the Deduction Master Browse Window
  • Select the desired employee and populate the Deduction Master Maintain Screen as described below:
FIELDS
Opt.
Rec.
Req.
Description
Deduction Description ID ——♦

Verify that it is the desired non-cash fringe ID

Adjustment/Additional Amount——♦
  • Enter the amount that should be added to the employee's taxable earnings
  • Ideally, you should set up a recurring amount to be added to each pay check throughout the year, to spread out the increase to the employee and employer taxes. Alternatively, you can enter lump sums to be added to their wages on a monthly/quarterly/annual basis
  • In either case, you are treating these earnings as imputed income, meaning you are including the fringe amount with the employees' regular wages, and calculating taxes on the total. The IRS does not care how often you report these taxable earnings, as long as you report them in the proper tax year
Active Deduction for this Employee——♦Flag this field so the system knows to include it in upcoming payrolls
Opt. = Optional  Rec. = Recommended  Req. = Required

Add Cash Fringe Benefit Deduction Description

  • Go to HR → Payroll → Setup → Deductions → Deduction Descriptions
  • Find an existing deduction/benefit that is most similar to the one you are creating. If you do not already have a Deduction Description with the Deduction Type of FRINGE-CASH, try to find an after-tax deduction with a W2 Deduction Type of Non-W2.
  • Click Select to open that deduction
  • The purpose of this deduction is to pay the employee cash directly in their net pay and increase taxable wages
  • Override the fields as shown below:
FIELDSOpt.Rec.Req.Description
Deduction Description ID——♦

Name the benefit appropriately (Example: Cash Fringe Benefit)

Short Description—♦—The Short Description will appear on the employees' checks (if the GSV is set to print the Short Description instead of the Deduction Description ID) so make sure it will be meaningful to the employees (first 9 characters prints on pay stub)
Type Tab
FIELDS
Opt.
Rec.
Req.
Description
Deduction Type——♦Select FRINGE-CASH; this is extremely important, as it drives the benefit's taxability
Vendor ID——♦Must assign a Vendor ID; can use a Dummy Vendor or one for the organization (no check will be created regardless)
W2 Deduction Type——♦Select Non-W2; there is not a separate W2 box for fringe benefits, however, the amount of the benefit will be included in the employees' taxable earnings in Boxes 1, 3, 5 & 16
Compute Tab
FIELDS
Opt.
Rec.
Req.
Description
Compute Type    
——
♦
Select Flat Amount (and $0.00 in the corresponding amount field)
Flags Tab
FIELDS
Opt.
Rec.
Req.
Description
Active
—
—
♦
Select Boolean to activate deducation 
Expense
—
—
♦

Select boolean to expense deduction

Base Pay    
—
—
♦

Select all three booleans to include all rate types

Nothing——♦Select boolean to not block any rates
Description Tab
FIELDS
Opt.
Rec.
Req.
Description
Description—♦—Enter a Description for this benefit that is meaningful and describes the purpose of the deduction

Table Name, Computation, Rate Selection, Gross Amount, and Affect Select Tabs

  • REVIEW the Data on all of these Tabs to ensure nothing needs to be Added, Changed, or Removed
  • Click Save
  • On the Type Tab ~ Click Accounts to set up the Deduction Account for expensing a cash fringe (An existing employer paid deduction can be used as a template; Once existing account is selected, pull in the new Deduction ID, type in appropriate object code and make sure Amount Withheld is 0)
  • Expensing a Taxable Fringe Cash Benefit is unique (pull in the new Deduction ID, type in appropriate Account code image). 
    • Because this deduction is not a liability paid through vendor withholding it actually increases the employee’s net pay and is expensed. 
    • Enter the Cash Code and the Liability Code - Both codes need to be the same as Cash Code instead of a real liability code so that it washes out during the distribution and doesn’t create a liability that won’t clear out. 
    • The Debit code image will be an expenditure control code and the Credit code image will be Cash code. 
  • Click Personnel Deductions

Add the one-time or recurring benefit to each applicable employee. 

  • Click the Add button on the Deduction Master Browse Window
  • Select the desired employee and populate the Deduction Master Maintain Screen as described below:
FIELDS
Opt.
Rec.
Req.
Description
Deduction Description ID ——♦

Verify that it is the desired cash fringe ID

Adjustment/Additional Amount——♦
  • Enter the amount that should be added to the employee's taxable earnings which is also added to the employee's net pay
  • Ideally, you should set up a recurring amount to be added to each pay check throughout the year, to spread out the increase to the employee and employer taxes. Alternatively, you can enter lump sums to be added to their wages on a monthly/quarterly/annual basis
  • In either case, you are treating these earnings as imputed income, meaning you are including the fringe amount with the employees' regular wages, and calculating taxes on the total. The IRS does not care how often you report these taxable earnings, as long as you report them in the proper tax year
Active Deduction for this Employee——♦Flag this field so the system knows to include it in upcoming payrolls
Opt. = Optional  Rec. = Recommended  Req. = Required

How a Cash Fringe Affects Distribution and Clear Checks

  • The Distribution report normally does not have any effect on cash, however in the case of a cash fringe the Balance Sheet cash credit is increased by the amount of the fringe.  Example below is the Balance Sheet for an employee with a cash fringe amount of $50.
  • On the Clear Checks, the cash amount (net amount) for the employee does not include the fringe amount
  • The total activity in cash equals the employee net pay

Add Non-Taxable Fringe Benefit Deduction Description

  • HR → Payroll → Setup → Deductions → Deduction Descriptions
  • Find an existing deduction/benefit that is most similar to the one you are creating. If you do not already have a Deduction Description with the Deduction Type of REIMBURSEMENT, try to find an after-tax deduction with a W2 Deduction Type of Non-W2.
  • Click Select to open that deduction
  • Override the fields as shown below:
FIELDSOpt.Rec.Req.Description
Deduction Description ID——♦

Name the benefit appropriately (Example: Non-Taxable Fringe Benefit)

Short Description—♦—The Short Description will appear on the employees' checks (if the GSV is set to print the Short Description instead of the Deduction Description ID) so make sure it will be meaningful to the employees (first 9 characters prints on pay stub)
Type Tab
FIELDS
Opt.
Rec.
Req.
Description
Deduction Type——♦

Select REIMBURSEMENT; this is extremely important, as it drives the benefit's non-taxability

Vendor ID——♦Must assign a Vendor ID; can use a Dummy Vendor or one for the organization (no check will be created regardless)
W2 Deduction Type——♦Select Non-W2; excluded from wages and are to subject to withholding, employer does not report on W2 form
Compute Tab
FIELDS
Opt.
Rec.
Req.
Description
Compute Type    
——
♦
Select Flat Amount (and $0.00 in the corresponding amount field)
Flags Tab
FIELDS
Opt.
Rec.
Req.
Description
Active
—
—
♦
Select Boolean to activate deducation 
Expense
—
—
♦

Select boolean to expense deduction

Base Pay    
—
—
♦

Select all three booleans to include all rate types

Nothing——♦Select boolean to not block any rates
Description Tab
FIELDS
Opt.
Rec.
Req.
Description
Description—♦—Enter a Description for this benefit that is meaningful and describes the purpose of the deduction

Table Name, Computation, Rate Selection, Gross Amount, and Affect Select Tabs

  • REVIEW the Data on all of these Tabs to ensure nothing needs to be Added, Changed, or Removed
  • Click Save
  • On the Type Tab ~ Click Accounts to set up the Deduction Account for expensing Non-Taxable Fringe Benefits. Expensing a Non-Taxable Fringe Benefit is unique (pull in the new Deduction ID, type in appropriate Account code image). 
    • Because this deduction is not a liability paid through vendor withholding it actually increases the employee’s net pay and is expensed. 
    • Enter the Cash Code and the Liability Code - Both codes need to be the same as Cash Code instead of a real liability code so that it washes out during the distribution and doesn’t create a liability that won’t clear out.
    • The Debit code image will be an expenditure control code and the Credit code image will be Cash code 
  • Click Personnel Deductions

Add the one-time or recurring benefit to each applicable employee. 

  • Click the Add button on the Deduction Master Browse Window
  • Select the desired employee and populate the Deduction Master Maintain Screen as described below:
FIELDS
Opt.
Rec.
Req.
Description
Deduction Description ID ——♦

Verify that it is the desired non-taxable fringe ID

Adjustment/Additional Amount——♦

The recurring amount to be added to each pay check throughout the year for non-taxable fringe benefit. Alternatively, you can enter a lump sum to be added.

Active Deduction for this Employee——♦Flag this field so the system knows to include it in upcoming payrolls
Opt. = Optional  Rec. = Recommended  Req. = Required