Non-Taxable Reimbursement Payroll Category

Description:

You want to apply a reimbursement payroll category that is non-taxable to your employees’ pay. This payroll category will not be subject to tax and will not appear on any of your tax returns. 

Pre-Requisites:

Please follow these steps to create your new payroll category after posting your last payroll, but before you begin payroll for the next pay period. 

Solution:

1. Navigate to Payroll Setup > Payroll Categories.
2. Click the “+ New” button in the upper-left corner to create a new payroll category.
3. Select either “Permanent Earning” or “Temporary Earning”. 
   Note: Please refer to the Harmony Payroll Manual for the difference between permanent earnings and temporary earnings.
4. Select the correct unit in the "Basis" dropdown field. To have your units for this payroll category in dollars, select 'Salary'. For all other units, select 'Other'. 
5. Define the "Code", "Name", and "Paystub Abbreviation" fields. 
6. Ensure that the "All" toggle on the right side of the page is deactivated. You will know it is deactivated when it is gray and all tax payroll categories are unchecked. 
   
7. Click the save button in the upper-right corner of the page to save your new payroll category.
8. Navigate to Payroll Setup > Assign Tax Form Boxes.
9. Select the payroll category you just created and ensure that the toggles are deactivated on the right side for each tax form. You will know it is deactivated if the toggle is gray. If a toggle is active, click to deactivate it.
10. If you made any changes, click the save button on the upper-right corner of the page to save.
11. Navigate to Payroll Employees > Assign Payroll Category.
12. Select an employee using the dropdown field. All assigned payroll categories will appear in the bottom half of the page. If the payroll category is active for the employee, the toggle will be green on the right side of the row.
13. Click the “+ Add” button on the upper left corner of the page. 
14. Select the payroll category you created from the dropdown list.
15. Enter the amount for this employee and click the “Save” button to add it to your employee. It will now appear in the list and will be applied to this employee’s earnings when you process payroll.
    • Note: You can change this amount at any time. Simply navigate to this same page, click the edit icon, and enter in the changed amount. Remember to save!