Set Up Fringe Benefits

For Sage 50 to recognize the fringe benefit, its name must be set up in Employee Defaults.

1. From the Maintain menu, select Default Information and then Employees from the submenu.

Sage 50 displays the Employee Defaults window.

2. Select the Employee Fields tab.
3. In the first blank line of the Field Name column, type a description of the fringe benefit. Never replace an existing field.

Note: The description can be a maximum of 11 characters. For example, if the fringe benefit entails an employee’s use of a car, you might type “AUTO” in the first Field Name column.

4. Select the Memo check box to indicate that the information in this field will not affect your company’s General Ledger or financial statements, but will be included in payroll reporting.
5. Continue to the next section. Do not click OK.

After the fringe benefit has been defined, you need to identify it as a taxable addition to income.

1. On the Fed_Income line, click the Adjust button.

Sage 50 displays the Calculate Adjusted Gross window.

2. Select the benefit Use check box. For our example, you would select the AUTO check box.

Sage 50 adds the fringe benefit amount to the adjusted gross before it calculates the federal withholding.

3. Select OK.
4. Repeat the steps in this section for any other tax on the Employee Fields and Company Fields tabs where the fringe benefit amount will be added to the adjusted gross before the tax is collected.

Note: You may need to repeat these steps for Social Security and Medicare taxes, and your state’s withholding taxes. Consult with your accountant about which taxes you need to adjust.

5. Click OK. to save the default information.

To ensure that the fringe benefit prints in the proper place on the employee’s W-2, you must assign the field to the proper box on the W-2.

1. From the Maintain menu, select Payroll and then Payroll Settings.
2. In the left navigation area, click on Taxes and then Assign Tax Fields.
3. Click the button for W-2 Fields.

Sage 50 displays the Assign Payroll Fields for W-2s window.

4. The fringe benefit should be assigned to either Box 12 or 14, depending on the type of benefit. See your accountant or the IRS for more information.
5. Click on the drop-down arrow in Box 12 or 14 to open the list. Select the fringe benefit that you set up. For our example, select AUTO from the list.
6. Click OK. to save the changes. Then click Finish in the Payroll Settings wizard.

To record the value of the fringe benefit as income so that your year-end reporting will be correct, include the benefit in the employee’s next paycheck.

1. From the Tasks menu, select Payroll Entry.

Sage 50 displays the Payroll Entry window.

2. Enter or select the employee ID from the lookup list.
3. In the list of fields on the right (Taxes, Benefits, Liabilities) scroll down and select the fringe benefit. In our example, scroll down to the AUTO field.
4. Enter the value of the fringe benefit in the Amount field. For our example, enter the value of the personal use of the AUTO as a positive number.

Consult your tax accountant or the IRS for rules and information regarding the value of fringe benefits.

Adding the amount does not increase the net check because the fringe benefit is set up as a memo field used for tracking purposes only. However, your federal income tax amount will increase because the benefit is an addition to gross income.

If the total gross does not cover the additional taxes, enter part of the value on this check. Then enter the remaining amount on subsequent checks until the entire amount is posted to payroll.

If you have to add the total gross to one check, enter the value of the benefit in the Employee Beginning Balance window. This includes the value of the benefit in the total gross wages on the W-2 and other payroll reports. It does not, however, adjust the federal taxes. Consult your accountant for information on the appropriate tax treatment of the fringe benefit taxes.

5. Enter all payroll information as necessary and then select Post, Save, or Print.
6. Select Close when you are finished.