4 APA's Top Payroll Questions & Answers for 2020 Q. How do you handle direct payments from employees who have pretax benefits for which they make payment outside of the payroll run (writing a check or making a cash payment)? Should we post the amount to a nontaxable earnings code and offset it by entering the same amount to the pretax benefit deduction? Is there an issue with this process since the money received was post-tax? A. The payments you describe here have no effect on an employee's taxable wages during a pay period because they are not wages and are not paid pretax. Pretax benefits are benefits offered by employers to employees as part of a salary reduction arrangement, such as is provided under a cafeteria plan (see, e.g., The Payroll Source®, §4.5-1). The salary reduction arrangement is structured to offer employees the choice between receiving cash compensation or the benefit. Such salary reduction contributions are considered to be employer contributions because the employees are electing to have a portion of their salary contributed to the plan by the employer. Since these payments are not wages, you should not be entering them into your payroll system. 37 Health, Accident, and Retirement Benefits Payment for pretax benefits outside of payrollhttps://bookshelf.americanpayroll.org/payroll_source/