I have an employee that currently has a loan with the company. A check was cut to the employee, and that was setup in QB desktop. They have been paying the loan back a set amount per paycheck. However, I want to forgive the loan, sort of like an end of the year bonus. Should I just journal the loan balance to the bonus account? What is the best way to put this in the books?
It should go through payroll so both employer and employee taxes are withheld/paid and the amount is recorded as wages on the employee's W-2. The net paycheck should be $0 and you can clear the loan balance and increase your wage expense with a journal entry - debit wage expense, credit note receivable for the balance.
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