Accounting Talk

Jason Saffer · Guest

I need to set up a Health Savings Account payroll item. We want to set up a
pre-tax Health Savings Account so that the organization can contribute money
into such an account for each employee. Here's what we've done so far:

Go to Add New Payroll Item

Choose Custom Setup

Choose Company Contribution

Enter Name for Deduction: we put in HSA

Enter Liability Account: should this be Payroll Liabilities?

Enter Expense Account: we're not sure what to choose here. Should we create
a new line item for this?

Choose Tax Tracking Type: we chose Health Savings Account

Choose Taxes: We selected all the taxes listed, including those for
California? Is this correct to do?

Basically, we're trying to set this up so that the employee can tell us how
much each month to deduct from their paycheck to insure it's a pre-tax
situation. I get the impression that an employee contribution per se is not
pre-tax, only an employer contribution is. Is that correct? Am I correct in
assuming that to have a pre-tax situation and to have it show up on the W-2
in box 12, we have to make this an employer contribution not an employee
deduction, even if we're adjusting the eemployee's salary accordingly?

Thanks for the input on this!

Jason