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Tax Setup

Set Up Group-Term Life Insurance

You can set up life insurance benefits for your employees. Group-term life insurance is a special benefit because coverage less than $50,000 is not taxable, while coverage more than $50,000 is taxable. For more on group-term life insurance, see IRS Publication 15-B.

  1. On the Payroll tab, click Tax Setup > Benefits/Allowances > Group-Term Life Ins..
  2. On the List of Benefits tab, enter the necessary information.
    • Name—Enter a unique name for the benefit.
    • W2 Letter—Enter a letter code for this type of benefit from the list on the back of the W-2 form. The code letter prints in Box 12 of the W-2. Some common codes used for Box 12 include:
      • Code C – Taxable cost of group-term life insurance over $50,000.
      • Code AA – Designated Roth contributions under a section 401(k) plan.
      • Code DD – Cost of employer-sponsored health coverage.
        Note: The Affordable Care Act requires employers to report employer-provided health coverage costs on employees' Form W-2. For more information, see the IRS requirements for reporting employer-provided health coverage.
    • Exempt From—Select the appropriate checkboxes if the benefit is exempt from that tax. If an item is selected as exempt, the benefit is subtracted before taxes are calculated.
    • Use a Multiplier of the Salary—Select and enter a multiplier if you want to use a multiplier of the salary.
    • Use a fixed amount—Select and enter a fixed amount if you want to use a fixed amount.
  3. On the IRS Age Multiplier Table and Coverage Limits tab, enter the necessary information.
    • You can adjust the ages or cost multipliers for group-term life insurance. Click Load Defaults to fill in the table or to get the current rates. For more information, consult the IRS Publication 15-B.
    • Coverage Limits—Enter the current coverage limit.
    • Round the Coverage Amount over the limit to nearest—Enter the amount to round the coverage to when it exceeds the limit.
  4. At the top, click Save.

After setting up benefits, you can add them to employees' Wages/Master Paycheck windows.

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Last updated: February 28, 2024