What's an allowance?
An allowance is a taxable payment to an employee that's separate from regular wages.
It's typically paid with each payroll to cover job-related costs, such as uniforms or auto usage, but it's taxable because it's not dependent upon actual receipts. Allowance amounts are not included in the pay base for calculation of percentage-driven deductions such as 401(k).
To set up an allowance pay type for an employee:
It's typically paid with each payroll to cover job-related costs, such as uniforms or auto usage, but it's taxable because it's not dependent upon actual receipts. Allowance amounts are not included in the pay base for calculation of percentage-driven deductions such as 401(k).
To set up an allowance pay type for an employee:
- Go to the Employees tab.
- Click an employee's name.
- On the employee's overview page, look for the Pay section and click Edit.
- Scroll down to the What additional ways do you pay? section and click to select the Allowance checkbox.
- Optional: Enter a default amount to be paid each paycheck. You can always change the amount when you create the paycheck.
- Click OK.
Next time you create a paycheck for the employee, the Allowance pay item appears. Simply enter or verify the dollar amount for the pay period and our payroll service includes the allowance amount when calculating the paycheck.
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