Can you use payroll system to advance an employee a loan together with reducing their weekly pay in the future to repay this loan?

Welcome to Quickbooks Community, dgage01.  

We can set up a deduction for personal loan of employee using Quickbooks Payroll.  First, we set up a Deduction, click here for the detailed steps. Then on the Employee's tab, select the name of the employee and go to Pay Run Inclusions to Add the Deductions.  This article shows how to enter deductions for an employee Updating Employee Deductions.

Feel free to reach out to us if you have other questions. 

Nona

Where do the deductions come off? Ie how do you set up the loan?

Hello JoannaW,

You can add a deduction on the pay run using the Actions button and click on Add deductions. First, let's make sure you have set up a deduction category. Here's how:

1. Click on the Payroll tab.
2. Click on Payroll Settings.
3. Click on Deduction categories.
4. Click on Add.
5. Enter a deduction name, select a deduction type and classification.
6. Click on Save.

If this is a recurring deduction for the employee, you can set up a pay run inclusion using the steps below:

1. Click on the Payroll tab.
2. Click on the employee name, and click on Pay run Inclusions.
3. Click on Add button next to Deductions.
4. Select the Deduction type, and enter the Amount.
5. Choose a method under This deduction should be paid.
6. Fill out other fields like start and end dates.
7. Click on Save.

Once done, when you create a pay run for the employee the deduction will automatically appear.

For reference you can check this link to learn more about: Set up employee deductions.

Drop by again in the Community if you have further payroll concerns. I'll be around to help you.

Thanks, I have done that part. How do you account for the money coming out of the bank account to the employee originally? 

Thanks for getting back to us, JoannaW!

If you are referring to categorising payroll payments downloaded from the bank to QuickBooks Online, you can allocate it to the Payroll Clearing account or to the account you have set up in your Payroll chart of accounts.

Here's how to check your payroll default chart of accounts:

1. Go to Payroll and select Payroll Settings.
2. Go to Chart of Accounts and select Default Accounts.
3. Run the regular payroll.
4. On the Transactions screen, you'll be able to match the journal entry to the payment made.

Your payroll journals are assigned to these default accounts once you have finalised the pay runs.

To categorise payroll payments downloaded in QuickBooks Online:

1. Go to Transactions, then select Bank transactions.
2. Select the bank account you use for paying employees, then find and select the transaction.
3. From the Transaction type dropdown, select Expense.
4. From the Category dropdown, select the payroll account, for example, Payroll Clearing.
5. From the GST dropdown, select an appropriate tax code, For example, Out of Scope.
6. Select Confirm.

This will create a transaction to debit the bank account and credit the Payroll Clearing account. 

If you are referring on how to pay the employees wages to their bank account, you can set up ABA files in your QuickBooks Payroll using this link: Set up and create ABA files in QuickBooks Payroll.

Feel free to reply to this post if you have additional questions.