Zenefits Payroll does support Owner's Draw as a Pay Type. This is a Zenefits administered Earnings Category listed in Payroll Settings.
What is an Owner’s Draw?
An owner’s draw is used to pay owners of the company who are not paid as regular employees. The draw account helps the owner know what amount of money or other forms of payment, has been taken from their business during the year. These payments are not taxed in payroll and will not be included in Box 1 of the W-2 at the end of the year.
If you're not sure if you qualify for an owner’s draw, you should consult a licensed tax advisor. There is more information about this on the IRS website.
Where does the Owner's Draw show up in payroll?
Admins can add the draw into the Earnings section of the employee pay template or the paystub within the payroll run.
What are the effects of an Owner’s Draw being added into Payroll?
Taxes are not calculated because there is no Gross Earnings. However, deductions and any applicable garnishments will be taken from the draw.
- Owner’s Draw is only affected by Medical, Dental, or Vision deductions
- 401(k) does not come out unless it is a fixed amount (Percent of gross does not work).
- Garnishments will only show a $ amount when there are gross earnings. Once you remove gross and use Owner’s Draw, the amount of the garnishment drops but the name of the garnishment remains.
- No taxes for employee or employer are calculated
So what's the difference between Owner's Draw and a salary? Read about it on our blog.