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  • Section: US Payroll
  • Last updated: May 21, 2019, 3:12 p.m.

Non-Cash Wage

In the information window of the wage categories, there is an option for indicating a non-cash wage. This option is used to indicate an amount of money that the employee has already received. Since the employee already received the cash, the employer need not pay the wage, but must withhold income taxes on the amount the employee already received. Thus, this option is used to calculate withholding taxes on wages when the employee already received the cash. The most obvious example of this is cash tips. This feature can also be used to report medical or other insurance premium payments, where the employer needs to indicate a withholding tax.

Canada

The non-cash wages are added to the gross EI Insurable Earnings and the CPP/QPP Pensionable Earnings, on the T4 form. The taxes calculated by AccountEdge are added to Employee's EI Premium, Employee's CPP contribution, and the Income Tax deducted, on the T4 form.

United States

There are 3 different types of non-cash wages: Reported Tips, Allocated Tips, and Other Non-cash Wages.

Reported tips
Automatically assigned to box 7, the Social Security Tips box, on a W-2, and the employer usually needs to withhold taxes on reported tips.

Allocated tips
Assigned to box 8, the Allocated Tips box on the W-2, and is the difference between reported tips and the standard tip percentage of gross allocatable receipts set by the authorities. Employers may not need to withhold taxes on the allocated tips amount. You'll need to check with your accounting professional or the IRS for details.

Other non-cash wage
Unassigned on a W-2. If you use this wage category, you will have to assign the wage category manually when preparing W-2s. This is a general non-cash wage category. It could be used, for example, if a company pays for medical insurance, and the employee needs to have tax withheld from the expensed medical insurance payment. So, you'll have to determine whether or not you need to withhold taxes on this category. Again, you'll need to check with your accounting professional or the IRS.

How to Set Up Non-Cash Wage

  1. Go to your top menu bar and select Command Centers > Payroll > Payroll Categories.
  2. At the top of the Payroll Category List select the Wages tab.
  3. Click the New button.
  4. Enter a Wages Name, Pay Rate, and Optional Account (expense account) for the wage.
  5. Check off the box for Non-Cash Wages.
    • If using the US version indicate the type of Non-Cash Wage.
  6. Click the Employee button to assign the wage category to applicable employees.
  7. Click the Exempt button and review any exemption settings for the wage.