Setting up a receivable account in QBO for COBRA payments
We have our first ex-employee on COBRA. We will be receiving his premium payments via check from our COBRA administrator in order for us to pay our vendor.
I created a new receivable account on the chart of accounts and labeled it Cobra Benefits Receivable.
I set up a new customer account for the COBRA administrator company and started entering an invoice for the first month's premium.
I created a new Product/Service and labeled it Cobra Payment (or should it be Cobra Premium?). What income account should I point it to? Other Miscellaneous Income? Something different?
Or am I doing this all wrong?
I have not done Cobra, so i may be way wrong. Do you pay the med insurance for the Ex employee, with the same vendor you currently pay other employee's med insurance? if so, i imagine there is a liability account set up, for the employee portion, and the company portion. If that is all true, then i would point those payments from the cobra fund, to the same liability account. I am not sure an income account should be used at all.....you might check with the CPA who handles this client. They are usually quite helpful, in these types of things.
Sorry i am not more help.
Thanks Casey for your input. My accountant said to set up the account as a receivable, which to me means I would need to set the COBRA administrator company as a customer and create an invoice. When I created the invoice and got to the Product/service entry, QBO is asking for an income account.
Your idea of using the liability account seems more logical to me.
Try it your way, and see if it works for you! CPA's are not always correct!
Both the receipt of the COBRA funds and the remittance of those funds are reported on the Balance Sheet. Income statement accounts do not enter into the transaction. No invoice is needed.
You can do what you need with two General Journal entries:
When funds are received:
- Debit Cash (or whatever bank in which the fund This were deposited)
- Credit COBRA payable
When funds are paid to insurance company
- Debit COBRA payable
- Credit Cash (on which the check is written) -- If you use the Write Checks function, a version of this will be done automatically if you indicate the account from which the payment is done and show the account being debited.
CPAs are not infallible. Neither are auditors.
Thanks so much Lorin - this makes so much sense.