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Active Member

How to record liability to employee if I defer payroll to future date?

Hi there,

 

I currently pay myself a salary from my business using Quickbooks Payroll in Quickbooks Online.

 

In a couple months, I may defer some of my payroll in order for the business to keep more cash on hand. 

 

How do I record this in Quickbooks so that it is documented that the business owes me this money?

 

Thank you,

2 Comments
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Re: How to record liability to employee if I defer payroll to future date?

This of course relies on you being one of the following only 

  • C corporation
  • S corporation
  • LLC electing to be taxed as an S corporation

No other entity allows you to pay yourself as an employee of your business.

The answer will depend on which of the three above you fall in.

In a C or S corp you are a shareholder first and employee second. Thus a deduction on your paycheck equal to net pay ( for a zero dollar paycheck) would be a Shareholder Loan to the company.

 

If an LLC even electing S for payroll you are still in a complete pass through for taxes situation the way I see it and in this instance you never loan money to yourself, but you contribute equity. So you would input a deduction equal to net from Member Contribution. An LLC is never required to repay its sole member for money put in.

 

Whatever you do, do not refer to it any longer as Deferred Salary since if as a non-qualified plan you don't meet all the requirements then your deferred pay is subject to a 20% penalty http://thestartuplawblog.com/deferred-salary-trap/

Active Member

Re: How to record liability to employee if I defer payroll to future date?

John,

 

Thank you for such a thorough and helpful answer. My company is a C-Corp.