Summary

Cirrus uses the IMPUTE benefit to calculate taxable fringe benefits. These benefits are often associated with group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. To determine if imputed income tax is applicable to your organization, please refer to the IRS website at www.irs.gov.

One specific IRS document that provides relevant group-term life insurance information:

• Group-Term Life Insurance section of IRS Publication 15-B

Follow this process to set up and implement the IMPUTE benefit.

Step by Step

1     Open the IMPUTE benefit.

• Open the Deduction/Benefit Selection window (PR> Maintenance> Deduction/Benefit).
  • This window will display all of the existing deductions and benefits in the system.
• Scroll through the deductions and benefits displayed in the data grid below until you locate the IMPUTE benefit. This is the standard imputed income benefit that was created when Cirrus was installed.
• Select the IMPUTE benefit and click EDIT to edit the benefit. This will open the Deduction/Benefit Maintenance window.

2     Update the IMPUTE benefit.

• Because this benefit is pre-installed, not all of the maintenance options will be enabled.
• Open the General tab.
  • Confirm that the Allow Negative toggle is NOT checked. Negative amounts should not be allowed on imputed income benefits.
• Open the Account tab.
  • If you would like to set up the IMPUTE benefit to have no impact on the general ledger, confirm that the default debit and default credit accounts are set to the same GL account number. Enter this account in the Default Debit Account and Default Credit Account fields or click the field search buttons   to select the account from a list. This will allow the imputed income benefit to be recorded for tax purposes without affecting the balance of the general ledger.
• Open the Calculation tab.
  • Verify that the Revision Steps section matches the monthly amounts from the IRS Imputed Income Table.
    • These are monthly amounts, but Cirrus will take pay frequency into account when calculating benefit totals.
      • For example, if your organization uses a weekly payroll schedule, the monthly amount of imputed income from the IRS table will be multiplied by 12 to determine the annual imputed income. The system will then divide that amount by 52 in order to distribute the total amount of imputed income across all pay periods.
    • These revision steps were likely set up when your database was initially installed or subsequently upgraded, but, as the step amounts are subject to change by the IRS, they should be confirmed before implementing the IMPUTE benefit. This table can be found in the Group-Term Life Insurance section of the IRS Publication 15-B linked above.
• Click the Save button to save the updated IMPUTE benefit.

3     Attach the IMPUTE benefit to an employee.

• Open the Employee Selection window (PR> Maintenance> Employee). This window will display all of the employees in the database.
• Select an employee and click EDIT to edit the selected employee. This will open the Employee Maintenance window.
• Confirm that the employee's Date of Birth is specified on the General tab.
  • The IRS uses the employee's date of birth to calculate the imputed income benefit. If you attach the IMPUTE benefit to an employee that does not have a specified date of birth, you will encounter an exception error when that employee is included in a payroll Computer Checks batch.
• Open the Benefit tab, click ADD and select New Benefit. This will open the Deduction/Benefit Selection window.Select the IMPUTE benefit and click the Select button   to attach the benefit to the employee. This will return you to the Employee Maintenance window and populate the IMPUTE benefit in the benefit data grid.
• Select the IMPUTE benefit and the benefit details will be displayed in the Benefits section below.
• Confirm that the Status is set to Active.
• Use the Reference field to record the total amount of the benefit that the employee is being provided.
  • In the case of group-term life insurance, be sure to record the TOTAL amount of insurance coverage. The IRS only calculates imputed income on insurance coverage above $50,000.00, but Springbrook will take this into account when processing the benefit.
    • When entering the total coverage amount, do not include dollar signs, commas or periods. For example, if the total coverage amount is $250,000.00, enter "250000". If the total coverage is entered in any other way, the system might not be able to calculate the benefit correctly.
  • If the employee is responsible for paying for part of the IMPUTE benefit, the deduction code that deducts that amount from the employee's regular pay needs to be included in the Reference field.
    • As with the format requirements for the total amount of coverage discussed above, the format for including a deduction in the Reference field is very strict. The format is the total amount of coverage without commas or decimals, followed by a comma, followed immediately by the deduction code without any spaces between. For example, if the total amount of coverage is $250,000.00 and the deduction code is LIFINS, the Reference field should read "250000,LIFINS". If this information is entered in any other way, the system might not be able to calculate the benefit correctly.
• Check the Cycle toggles for each cycle the benefit should be included in.
  • This benefit should be included in every regular pay period in order to reflect the fact that the IMPUTE benefit will increase the employee's FED tax liability for every pay period.
• Click the Save button to save the changes.

4     System calculations example.

• The following example outlines how the system would calculate the IMPUTE benefit.
• Variables:
  • Total amount of coverage - $250,000.00
  • IRS IMPUTE revision step for employee - 0.08
    • The employee's date of birth is 12/15/1992 and payroll is being processed on 10/12/2022. At the time of payroll processing, the employee is 29, but as of the last day of the year, 12/31/2022, the employee will be 30. This places him in the third revision step for the IMPUTE benefit.
  • Payroll schedule - biweekly (26 pay periods per year)
• Example: