Payroll Health Insurance Accounts

Offering Health Insurance benefits through your company payroll can be an attractive benefit to obtain and retain employees, however the bookkeeping for BOTH health insurance paycheck deductions and company contributions is something that has to be monitored quite continuously, even if your do not alter any wages during the year. This is because the cost of health insurance premiums, for each employee, can also change, and when this happens, small business owners tend to forget to change the corresponding paycheck deductions and/or company contributions, which will get noticed eventually in the main bookkeeping platform for your company.

A sign that your health insurance payment premiums are not matching all of the reported paycheck health insurance deductions and company contributions is:

  • If you keep track of these payroll health insurance liabilities (or assets depending on how you look at things, but it is still a balance sheet type of account) in your bookkeeping platform, you will notice a trend when this company health insurance liability account is always going negative each month, OR, if this liability account balance is continuously growing each month overall.

Whether you directly integrate your payroll module with your bookkeeping platform, or if you post manual entries each month, you must always be sure your reported paycheck health premiums (deductions + contributions) exactly match the health insurance premium payments to the health insurance company.

If you do not track this liability continuously and instead just expense everything after each paycheck run, then premiums matching can be lost, therefore payroll tax forms reporting may be inadvertently incorrect.

I also do NOT recommend posting yearly catch-up entries in your payroll module to assist in making everything correct for payroll forms reporting purposes. Payroll adjusting entries can be little understood especially the overall ramifications of what all exactly is being affected in your bookkeeping and tax reporting world.

So, overall, each month when you post those health insurance premium payments in your bookkeeping platform, be sure you post these payments to the correct accounts in your chart of accounts and keep an eye on those balances to ensure nothing goes awry after it may be too late to fix.


Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.

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