My employer gave hand written bonus checks, seperate from payroll. I now need to enter these manually. He did take the 22% that is required out by the 2018 IRS statement. I want to make sure I enter these correctly. Can someone one guide me so I do not have to do it twice.
This is not the only tax, though, "He did take the 22% that is required out by the 2018 IRS statement."
Next time, just put it on a regular paycheck. They didn't need to have 22% withheld, if it was on a regular paycheck as a bonus. And now look at all the extra work you need to do.
You need a Net Pay Deduction item, set as NONE for tax tracking. You link it to an Other Current Asset account. Name the Account Employee Advance. Name the Payroll Item "Advance Repayment."
You also need a Net Pay Addition, linked to that same account and set as NONE for tax tracking. Name this Payroll Item "Employer Advance."
For the taking of Cash that got handed out, in that Bank account that was used to draw out Cash, make one Transfer or Write Check, and you will list "to" account or on the check the "Expense" for drawing the Cash as "Petty Cash Bank." That shows the cash left one source bank account and is On Hand as Cash (a Bank in QB). Now for each Handout to each person, this is Write Check from Petty Cash. The Payee is each employee name. The Expenses tab entry is Other Current Asset. This is the total they got handed to them, not their Gross Bonus.
Now that Petty Cash Bank should be 0.
Meanwhile, on the Unscheduled Paychecks, you need to list the Gross Bonus. You will manually override the Fed Withholding in the Unshaded column at the bottom right. You also need to use both the Net Pay Deduction (to avoid giving them the Funds, again) and the Net Pay Addition, because FICA will calculate, and this paycheck cannot end negative. Example:
A Bonus is $1,000 but the employee got $780 Cash.
Their Paycheck looks like this:
$1,000 taxable Bonus
$220 deducted for Fed Income tax (my State has a 6% flat requirement, as well)
$14.50 required deduction for Medicare
$76.50 required deduction for Social Security
= $689 takehome. But the person needs you to add the amount of Cash in the Net Pay Deduction item on the left middle side. So:
$689 minus $780 leaves a negative $91. That means you Add $91 using the Net Pay Addition Loan on the middle left side, so that the Paycheck ends as $0.
And now next payroll, you need to Deduct that $91 from this person using the Net Pay Deduction item.
In other words, the wrong amount is given as Cash, only part of the right amount of taxes was withheld, and now the employer needs to help Cover the FICA taxes owed by the employee.
Run a Custom report filtered on the Other Current Asset account and set it to total by Name, to monitor that each employee has the right amount in the following paycheck or two, to have repaid the tax advance and ends with a balance of 0. Then you reconcile that Other Current Asset account to an ending balance of 0 clearing only the name activities for each name from each side, for the name that is at 0, now. Make and retitle two versions of this report and Memorize them. One is All Activity. One is filtered on Cleared Status = No and titled Current Balances.
Next time, if they want to hand out Cash only, do it like this:
Make the unscheduled Bonus Paychecks as Gross Bonus. Let taxes compute. Make these Paychecks as From your Petty Cash Bank. You see each Takehome right there.
Then, that Petty cash Bank account has the total you need to draw from Checking, as Transfer to Petty Cash. Now the Petty Cash bank account is 0.
Hand out the Paycheck Stubs and the Cash Money in envelopes per each paycheck amount that is part of Petty Cash. Now they see their Gross Bonus info, and got the Takehome as Cash.