If you’re using Gusto for payroll in New York, it’s helpful to understand how the New York State Disability Insurance (DBI) and Paid Family Leave (PFL) Insurance work. These programs support your employees during tough times, like when they’re sick or need to care for a family member. Gusto simplifies payroll, but it’s up to employers to ensure the right contributions are deducted from paychecks. If those amounts aren’t withheld, employees may have to pay directly to the state, which can be a hassle!

Remember, all employees in New York must contribute to both the Disability Benefits and Paid Family Leave programs, even if they’re not using them right now. If you choose not to handle these deductions through Gusto, make sure to stay compliant by making direct payments to the state to avoid penalties. This keeps your employees eligible for those important benefits when they need them most. And if you have staff in Hawaii, don’t forget about the Hawaii Temporary Disability Insurance (TDI) for extra support during temporary disabilities! Just keep in mind that if you’re withholding the right amounts, you’ll need to pay those costs directly.

For each of these benefits, Gusto provides you with the option to withhold the allowable amount, or you can elect for your organization to pay for 100% of the cost of the benefit, as a service to your employees. This option can be set in Gusto under Taxes and Compliance -> Tax Setup:

Then select Manage Taxes under the relevant state section:

At this point, you will be provided with one of the following options to select:  

If you have selected the options as shown in the images above, Gusto will calculate and withhold the relevant statutory amounts for the selected benefit, but not actually withdraw the amount from your account, since they will not be processing the payment. However, when you import the journal entry into Aplos, the amounts withheld under the above selected benefits will be included in the “Taxes” withdrawal, as if Gusto automatically remitted the payments to the respective agencies (which would normally happen under normal circumstances). Since Gusto will not be remitting these payments on your behalf, you will need to manually reduce the amount shown as remitted to Gusto, then reclassify the amount to an expense account[1] (this would show as a negative, or credit, in an expense account). When you subsequently pay the applicable benefit provider, you will record the payment to the same expense account used in the payroll journal entry. Below is a step-by-step breakdown to accomplish this process.

Step 1: Identify Taxes Withheld in Gusto

You can find the amount to reclassify by going to “Reports” in Gusto, selecting “Payroll History” and then “view details” for the relevant Payroll Summaries. You can find all of the taxes withheld from your employees in the section “What Gets Taxed and Debited”. Here you will need to add the amounts in the “By Your Employees” column for the Tax Descriptions “NY SDI”, “HI Temporary Disability Insurance” and “NY Family Leave Insurance”, as shown in the image below ($1.20 + $4.40 + $12.68 = $18.28 in this example): 

Step 2: Adjust the Journal Entry for the Payroll Withdrawal

The total amount recorded in the Aplos Journal Entry for Taxes is the sum represented in the two columns above. In the below example, it would be $10,624.22 ($8,024.87 + $2,599.35). But the amount Gusto actually withdraws for taxes is $10,609.33 ($10,624.33 - $14.89).

In this example, you would need to find the amount for Taxes in the Journal Entry of $10,624.33 and reduce it by $14.89, to $10,609.33. You would then add a line to the journal entry recording a credit to an expense account for $14.89[2].

Step 3: Pay for the Benefits and Post the Transaction

The final step will be to pay this benefit cost for the state of New York or the state of Hawaii. These can usually be paid through a purchase from any state-approved insurance carriers, or by adopting a “self-insured” plan. Guidelines for providing the NY SDI benefit can be found here, guidelines for providing the NY Family Leave insurance benefit can be found here, and guidelines for providing the HI Temporary Disability Insurance benefit can be found here. Once you pay for this benefit, you would post a transaction for the full amount of the benefit cost to the expense account that you have been crediting with the withheld amounts. ____________________________________________________________________________________

[1] This may not reflect Generally Accepted Accounting Principles (GAAP). If the amount withheld is considered to be material for your organization, you should consult with a Certified Public Accountant as to the appropriate recording of the journal entry. [2] This example is an overly simplified example with the assumption that you are posting payroll to a single fund and tags are not being used. Multiple tags and funds increase the complexity of the journal entry and our support team will be happy to assist you in addressing the added complexity.