1. Open Quickbooks desktop and click on the Lists menu and select Payroll Item List.
    1. Note: If payroll is not turned on in your Quickbooks file, then you will not see the Payroll Item List selection.
  2. You will need to create a new payroll item for the employer contribution match portion of an employee’s Health Savings Account plan, so to do this click on Payroll Item at the bottom of the screen, or simply select Ctrl+N.
    1. Please Note: Do not confuse this setup with H.S.A. Employee Deductions to these same Health Savings Accounts. Employee Deductions are a completely different payroll item setup in QuickBooks.
  3. Select Custom Setup and click Next.
  4. Click Company Contribution and click Next.
  5. Enter a name for your new payroll item, such as H.S.A. Corp and click Next.
  6. Choose the vendor name whom you will be submitting these H.S.A. payments to, such as Optum Bank, or the like.
  7. Select the Payroll Liability account where the H.S.A. contributions will be tallied up for later payment.
    1. Note: This selection is important because this is the liability account where H.S.A. contribution payments will be applied against for future bookkeeping.
  8. Click Next.
  9. For the Tax Tracking Type, choose H.S.A. Co. (Nontaxable).
    1. Note: This selection is important because it affects the following payroll tax forms: Form 940, Form 941 and the employee’s W-2 form.
  10. Click Next.
  11. Click Next. Note: You should not need to change anything in the Taxes section of this wizard.
  12. If you plan on having the payroll software calculate these payroll contributions based on a manual quantity you enter in on EACH PAYCHECK or based on the employee’s hours worked on EACH PAYCHECK, then choose one of these selections.
    1. Note: Most of the times you probably will select Neither as this amount probably will be preset within each employee’s payroll profile, either as a flat amount or a percentage of wages (be sure you understand gross vs. net wages here).
      1. Note: There are limits as to how much money can be added to an employee’s Health Savings Account each year.
    2. Click Next.
    3. Enter a Default Rate & Limit only if you want this information to be the company default choices for all employee profiles.
      1. Note: Most of the times you probably will want to leave this section blank as it is most accurate to simply set up the actual amounts manually within each employee’s profile.
        1. If you do set up each deduction manually within each employee’s profile, keep in mind there are limits as to how much money (aggregating both the employee and employer additions) can be added to an employee’s Health Savings Account each year.
      2. Click Finish.
Share This Post: