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ajm01998
Level 3

Forgone interest on employee loan

We made an interest-free loan to an employee.  The IRS requires that the interest that would have been charged to the employee (the "forgone interest" - equal to the loaned amount multiplied by the Applicable Federal Rate) be treated as taxable income to the employee.

 

How do I record the value of this forgone interest in QuickBooks so that the employee's W2 will reflect this amount as income to the employee?  Should I use a Company Contribution payroll item?

Solved
Best answer January 23, 2022

Best Answers
Rustler
Level 15

Forgone interest on employee loan

I would use an Other Income item in payroll

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2 Comments 2
Rustler
Level 15

Forgone interest on employee loan

I would use an Other Income item in payroll

ajm01998
Level 3

Forgone interest on employee loan

Yes, I ended up creating a payroll item for the forgone interest and had it hit compensation expense.

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