Payroll Income Codes

If you have employees who receive income other than regular or overtime wages or salary, you need to define the payroll income codes that describe the types of income the employee will receive. Income codes can be defined for such things as "Advanced Wages," "Bonuses," "Expense Reimbursement," etc.

Income Type
Enter the description of the income code. The description can be up to 20 characters long and will appear on the employee's check stub.

Amount or %
If there is a default amount that applies to most employees, enter it here. This amount can be overridden when adding this code to the employee record.

Calculation Type
The income can be either a calculated or fixed amount addition. Choose "Fixed Amount" if the amount entered for this code is a flat rate and does not vary depending on the employee's gross income. Choose "Percentage" if the income should be calculated as a percentage of the employee's gross income. If the income is a variable amount, such as mileage or an expense reimbursement, enter it as a fixed amount, since the amount of the income can be overwritten during the payroll processing.

Expense Account
Choose the expense account to use for the payroll income codes.

Include in Gross Pay
Check this box if the income is to be counted in the employee's gross wages, such as a bonus, where it needs to be reported as income. Including it in the gross pay will cause it to show on the W2 form at year-end.

Subject To:
Check the box beside any tax that is subject to this income. Any tax that this income is not subject to will not have this income included in the taxable wages for that tax. Generally things like expense reimbursements will not be included in gross pay and will not be subject to taxes, since its money that the employee paid from their own pocket.