Benefits and deductions impact employees' taxable earnings. Proper entry allows benefits and deductions to be accurately reflected on Form W-2.
Benefits
Benefits are employee compensations that are in addition to their salary or hourly wages. Benefits offered with payroll are:
- Bonus
- Commission
- Allowance
- Expense reimbursement
- Dismissal pay
- Shareholder medical premiums, also known as the 2% Shareholder Health Insurance Benefit
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is no longer supported through Wave’s payroll feature. If you have added this benefit to an employee in the 2025 tax year, it will still be added to the employee's Form W-2.
To learn about a benefit, add a benefit to an employee, and Wave will list more information.
Deductions
Deductions are funds taken from an employee’s paycheck for things like insurance, medical, or retirement plans.
It is your responsibility to ensure that contributions do not exceed IRS contribution limits.
Deductions offered with payroll are:
- Roth 401(k) Employee Contribution
- Cafeteria Plan (Section 125)
- 401(k) contribution
- HSA Contribution
- FSA Dependent Care Contribution
- FSA Medical Contribution
- Simple IRA Employee contribution
To learn more about a deduction, add a deduction to an employee and review the information shown in Wave.
At year-end, if you have made employer contributions to the HSA, submit a request for our Support Team to add them to the correct year-end forms. Open Mave, Wave’s automated chatbot, and type human support employer HSA contribution. Then, provide the employee's name and employer contribution amount.