Payroll Advances & Repayments

Hello there, @DRGray.

Thank you for choosing QuickBooks Online as your accounting and payroll partner. Let's work together in creating and setting up employee advances and repayments.

We can begin with setting up a cash advance repayment deduction:

1. On the top menu, click the Gear icon.
2. Choose Payroll Settings.
3. Select the Deduction tab.
4. Click Add A New Deduction/Contribution.
5. On the Category dropdown, select Other deductions.
6. Select Cash Advance Repayment for the Type.
7. Enter a description and then click OK.
   

Next, assign the cash advance repayment deduction to your employees:

1. From the left menu, go to the Workers tab.
2. Under the Employee list, click the employee's name.
3. Click the Edit (pencil) icon in the Pay section.
4. Go to the Does *Employee name* have any deductions? section and click Add a new deduction.
   
5. Select the Advance Repayment item.
6. Enter $200 for the specific amount.
7. Click OK to save the changes.
   
8. Proceed with the other employee's profile and follow the same steps.

I also recommend seeking an accountant for an expert's advice to ensure there will be no problem with the books in the future. For additional reference, you can check this link: Set up cash advance repayment deduction.

That should automatically have the deduction item on the employee paycheck on the next payroll schedule.

Please let me know how it goes or if you have any follow-up questions about payroll. I'll be here if you need further assistance. Have a good one.

which account should the advance go to when you write the employee the draw check? The deduction in payroll falls under Repayment: Employee Advance. But when the check is written out it goes to an account that I created, called Employee Advance. Since QB created the repayment account for me in payroll, when it's being paid back to the company in payroll it's not hitting the same account. So now there are two accounts, one that's increasing when the payment is given to the employee and then another when the draw is being paid back to the company. Please advise. 

Which account should the employee advance go to when you are recording the draw being given out to the employee? QB created a Repayment: Employee Advance account for me when I created the deduction in payroll. But now there are two separate accounts that aren't balancing when the draw is given and when it is deducted in payroll. The draw is going out to Employee Advance, that I created, and when the advance is being repaid to the company it is going to Repayment: Employee Advance. 

The account where the advance payment was deducted should also be the account where the repayment is posted, jessheegard.

Since you have two separate accounts, you might want to transfer the funds from one to another. You can do this through the help of journal entry:

1. Click the Plus icon from the left menu. 
2. Select Journal Entry under other. 

I'd also recommend consulting an accountant about this to make sure everything is recorded properly. 

Get back to us if there's anything else you'd like to ask. 

You've only shown half the process here?  You've shown how to account for the "repayment" from the employee's paycheck.  You never showed how to create the proper account to MAKE THE Payment in the first place.    Later on, another person shows how to "fix the screw up" by transferring the funds into the correct account.  ????

That's totally messed up.   Can you show from beginning to end how to make this work correctly ,......from to to.

Agree, I can't find instructions on how to pay the advance in the first place. If I do it with a journal entry, it doesn't come up when I create a report on the account and sort by name. I need to track this accurately for multiple employees.

SERIOUSLY! I've been looking for this information for hours trying to figure out how to accurately categorize the outgoing cash to begin with!! This post and your responses is the closest I've come to having this issue solved... so can we get a straight answer here??

Good day to you, @acarverlabrum.

I see how important categorize cash advance payments to your employee. Let me provide details steps to resolve this.

If you have given your employee a pay advance, you can collect the money by creating a cash advance deduction item in QuickBooks Online Payroll.

Here's how:

1. Select Payroll, followed by Employees.

2. Choose your employee's name, then click Edit employee.

3. Is [employee] entitled to any deductions? Choose + Add deductions.

4. Choose +Add a deduction/contribution.

5. Select Other taxable deductions from the drop-down menu for Deduction/contribution type.

Put in the following:

• Type of deduction/contribution: Other deductible expenses
• Repayment of a Cash Advance
• Add a description to the deduction, such as Cash Advance Repayment.

7. Select Flat amount. 

8. Enter the amount to deduct from your employee's paycheck.

9. If you need to collect the advance over more than one paycheck, enter the total amount owed in the Annual maximum field.

10. When finished, select Save, then Done.

In addition, QuickBooks payroll allows you to set up direct deposit and remove the hassle of paying employees with paper checks. Feel free to read this article for more info: Set up your company payroll for direct deposit.

Don't forget to come by if you have other payroll concerns. I'll be here around to lend help. Have a pleasant day!

I agree only 1/2 information is given.  You need to set up an asset account and a payroll item.

Set up asset account

1. Create an asset account called Payroll advance. (This only needs to be done once and will be used for employee advances)

2.When you give the employee an advance you should create a separate account under Payroll advance

    naming it "employees name"   

3. Write the check and put it under the Payroll advance "employee name" account

Set up the payroll Item and list the Payroll advance "employee name" account, as the account to apply the

payments to.

This will give you an account on your balance sheet, that will show you payroll advances and balance owed.

Hope this helps.

How do we deduct payroll taxes from the advance on the paycheck?? In other words, giving our employee a $200 payroll advance is $200 gross. Then, when payday comes ... he'll pay us the $200 (gross) back ... but he'll also earn $200 gross and need payroll taxes deducted, right?

Can someone advise - step-by-step - in QuickBooks Online - how to do this??

I've searched for hours online and cannot figure this out.

It won't let me tie an advance to an asset account, only expense accounts. Now what

This whole paycheck advance is confusing in QB Online. It was so much easier in Desktop. I could just deduct an amount for the advance from a paycheck and have it mapped to the current asset account named employee advances. Now in online I recently put an employee advance as a type of pay type and added that to the employee's gross wages. Once processed, there is no way to change that to track what I wanted as a loan to the employee as an asset now and pay it down on the next pay check. I can track that pay type as an expense, but it is not an expense, it was meant to be a loan. I did deduct the amount from the next pay check, but no where are the two linked, so that it shows that I made the advance and it was repaid. What can I do now? In Desktop, I could always delete a payroll check and re-do. Online is not forgiving at all. Spent two hours with support this morning and nothing was resolved.

So I am getting that there is no way to do an advance through the Run Payroll process? You have to record a check to the employee like to a vendor and apply it to the employee loan asset account?  Then deduct all or portions of that from the next check(s)? Why two steps? I thought online was supposed to be easier?

Hello there, @TMoore.

I appreciate you for providing detail of your current situation. Upon reviewing your response, I'd recommend checking the current employee loan and repayment items setup to ensure they're set properly. I'll gladly walk you through the process to get you going. 

To check employee loan setup, here's how:

1. Set up Other Earnings pay type.
2. In the Additional pay types section, select Other Earnings. Select Edit ✎ to rename it as Advance payment.
3. Add the amount or enter it as you run payroll.
4. Select Save.

To review your employee's repayment setup here's how:

1. Go to Payroll, then Employees.
2. Select your employee.
3. From Deductions & contributions, select Start or Edit.
4. Select + Add deduction/contribution.
5. From the dropdown menu, add the following:

• Deduction/contribution: + Add deduction/contribution.
• Deduction/contribution type: Other deductions
• Type: Cash Advance Repayment
• Description: Add a deduction name, such as Cash Advance Repayment.

       6. Select Flat amount.

       7. Enter the amount to deduct from your employee’s paycheck.

       8. If you need to collect the advance over more than one paycheck, enter the total amount owed in the Annual maximum field.

       9. When finished, select Save.

For more details, please see this article: Set up and repay employee advances.

If you find any inaccurate details in your current employee loan and repayment, you'll want to contact our Customer Care Team. This way, they can access your account in a secure environment and proceed with the corrections. See this article for further guidelines: Contact Payroll Support.

In addition, here's an article to help you manage you employees inside QBO: Edit or change employee info in payroll.

Please don't hesitate to reach out in the comment section if you need further assistance, @TMoore . I'm determined to help you get through this. I'll be here in the Community space, ready to assist you again. Stay safe!

Yes, I did all that, but the advance and the deduction don't balance out. The advance doesn't appear in the current asset account I created called "Employee advance". Only the later deduction does. Thanks

I appreciate you for doing the steps provided above, @TMoore. Let me direct you to the best help to assist you with your payroll issue. 

As provided by colleague KurtKyle_M, it's best to contact our QuickBooks Online Payroll Support Team for assistance. They have tools to check further into your account in a safe environment and guide you with the corrections. 

Here's how:

1. Go to Help (?), then click Contact Us.
2. Please enter your question and select Let's talk.
3. Review and Select from the following: Ask the community, Have us call you, or Chat with us.

Please know that when contacting our support, ensure to reach out to them during their available hours.

Please let me know if you need clarifications about managing employees in QuickBooks Online Payroll. I'll be standing by for your response.  

Did that too. We spent 2 hours trying to figure it out. The extra earning category can only be mapped to an expense account, the deduction to the asset account. I'll just leave it for now. I can't spend another two hours on this at present.  If I do an advance next time, I will just write a check to the employee from my bank account and categorize it to the asset account, skip trying to do it through payroll.

I have been through every comment, question, tutorial on this topic.

From what I understand, there is no way to tie out specific accounts for individual employees. I have to go in and reconcile advancements after every payday. Ridiculous. 

@TMoore 

Here is what I am doing this next payroll to see if it works.

1. I created a payroll liability account called repayment. 

2. I created a specific account under Repayment with the Employee's name

3. For the check or expense spent on employee, I categorized it under the new Repayment account for that employee- now it shows a balance for that account in chart of accounts.

4. NOW for the deduction... I created a new deduction with employee name.

5. Then you have to go to Payroll Settings under the gear icon on main page. Go all the way down to Accounting Settings. There you will see where all of your deductions are mapped to accounts in your chart of accounts. Map the deduction for that employee to that account you created in Payroll Liabilities. 

Technically, advances are an asset I believe but I got this to map and it should auto reconcile after paydays so I am going to work with this until I have my next meeting with accountant.

Did that work for you? If not, did your accountant come up with a solution?

@Sibyl 

Yes, It is working. I am not sure if it is accurate accounting wise as far as money in and money out but I don't have to go in and reconcile after every pay check. I just check on it to make sure it ends if I didn't put a max amount.

If I have to deduct anything from someone's paycheck now that is repayment for advance or equipment, I create an account and point to that account on their paycheck. 

I'll give it a try, thank you!

Great posts here on something I think QBO should give better directions for...I am into this now with a client.

TM, I think you have it right except a repayment (amount owed from employee) should be, as you say, an asset account. 

Wish I had seen your post sooner!...took me a little while to figure this out..I am trying to get my client's 2022 books ready for taxes and seeing a lot of old transactions in this category that i'm having to deal with as well.

Here's how I'm handling it going forward:

1. Set up an asset account on the COA called "Employee Advances and Repayments", something like that.

2. Now go to the employee, and in his/her profile, do "Add deduction/contribution".  Then add a new one, type is Other Deductions, cash advance repayment type, and ... this is the important part -- give it a name that will show on the paycheck AND you'll put it on your COA. Make it employee specific.  E.g. "Repayment IR"  (i put the initials there.)

3. Now go to your COA and add a subaccount under the one created in #1. I find it easiest to use the same name as in #2.

4. Now we have to map that from the person''s paycheck to the COA:  Payroll setting, Accounting preferences, scroll down, youll see the item on the left and have to "edit" so that you can put the correct COA account item in.

So this does the PR deductions, as people have said. We what need, though, is the original "charge" to that COA account which the employee will pay down.  So Journal Entry that or create an expense. For example, I had my client bring up her credit card transaction/expense and for the item the employee needs to pay her back for, we charged that to the Repayment item in  #3. 

I hope this helps someone!

Interested to hear if there's any way to improve the process. Maybe we all need to do the Feedback button and ask Intuit to add a feature to set this up more easily...

thanks.

@DS127  I think this is what I did pretty much. I went back and looked and the Repayment account is actually in the Asset section. They definitely need to give better directions on this. I am not sure why they don't have more little wizards when you are creating something like this. Thanks for responding. It is nice to see people on here helping each other.