There are two ways you can pay an advance to an employee. You can either write the initial advance check out of your accounting program or out of CheckMark Payroll. Either way, you still need to deal with the taxes in CheckMark Payroll. If you write the check out of your accounting program, skip to the Taxing an Advance Check section below for information on recording the taxes in CheckMark Payroll. If you write the check out of CheckMark Payroll, Start here:
Creating an Advance Check
- Setup an Additional Income category for Advance, make the income exempt from all taxes, and select Variable Amount as the calculation method.
2. Assign this Additional Income category to the employee(s) receiving the advance.
3. Create the advance check by entering the amount in the Advance field of the income section of Calculate Pay.The gross and the net will be the same if no other incomes or deductions appear. If you have any other incomes or deductions that appear, you should zero them out for this check. (You can use the Disable Deductions button on the Calculate Pay window to zero all deductions for this calculation.)
4. Create the check as you normally would.Since you’ve made the income exempt from taxes, all tax reports will show the correct “taxable wages” leaving off the advance amount. However, the Earnings Register will include the advance in the gross wages amount.
Taxing an Advance Check
The next time you create an actual paycheck for an employee who received an advance, you need to deduct the advance amount and tax it.
- Setup a Deduction category for Advance. Choose Variable Amount as the calculation method. All other options should be blank.
2. Assign this new deduction to the employee(s) who received the advance.
3. Create the next paycheck as you normally would, except enter the amount in the Advance field of the deduction section. This will reduce the net by the amount of the advance, but is taxing the entire amount since you didn’t tax the advance when it was paid.
Note: You should assign the same Ledger Account to both the income and the deduction to create a wash.