Reissuing Expired Paychecks

I’ve got some information for you about uncashed payroll checks, @duneslady.

In QuickBooks Desktop Payroll, unclaimed wages such as uncashed checks must be reported to the state. Under Escheat regulations, you’re responsible for remitting unclaimed property to the state.

To resolve this, you’ll want to reach out to your state agency for rules governing escheatment. Please know that rules vary per state.

You can read this article for more information about handling escheat regulations: Understanding Escheat regulations for unclaimed wages.

I’ve attached this reference to learn how to manage your payroll efficiently: Learn about QuickBooks Desktop Payroll with how-to videos.

If you have any other payroll concerns or questions, please leave me a message in the comment section. I’ll be here to help. Take care always!

I am sorry, I think I caused confustion with my post.  The employee put the checks away to deposit later after she could get to the bank, but it ended up being several months later and by the time she went to the bank they had reached the 6 month expiration date.  She has requested I issue new checks to replace the ones form earlier in 2021.  I wasn't sure how to proceed on issuing the new checks. Can you help?

Thank you so much for your response.  It was very helpful.  Again, I am very sorry for the confusion.   

I have an abandoned paycheck that needs to be reported as unclaimed property to the state. What is the correct process to clear that paycheck from the payroll account and reissue it to the state?  

Hey there, Sandy_L. I can help share some information on how to handle employees' unclaimed wages or paychecks in QuickBooks.

You are in charge of reporting and giving the state an abandoned paycheck. The state becomes the owner of it via the Escheatment process.  

Here are the things you must do and don't do for unclaimed wages.

As an employer, you should do the following:

• Hold the check for the employee to claim for a while (maybe 1 to 5 years) before you turn it over to the state.
• Before you notify your state of any abandoned or unclaimed employee wages, make an effort to get in touch with your employee.
• Contact your state agency to find out what to do with employee pay in your state.

As an employer, you shouldn't do the following:

• Void unclaimed employee paychecks. The employee is still entitled to this money. 
• Change the name on the paycheck to that of the state. The paycheck must remain in the employee's name.
• Return the uncashed paychecks to your checking account. Once a paycheck is issued for wages to an employee, those funds no longer belong to the company in any way.

For more details, please see this article: Understand the process of unclaimed wages.

Please let me know if there is any other way I can assist. I'll be around to help.

I understand the Unclaimed Property concept. I am seeking assistance with how to clear the payroll account. In other words, what are the transactions that need to be entered into Quickbooks that will (1) pay the state (2) remove the outstanding paycheck amount from the payroll checking account. 

I am needing the same information. I have already submitted the info to the State but I still have the paycheck sitting in the uncleared checks in QBooks. I am trying to close the year and need to know how to clear the check.

Please see 2 replies below.

Hello there, @Annmaricoop. I want to make sure you get the help you need.

To ensure we're on the same page, can you add more details on where the uncleared checks are showing on your QuickBooks Desktop account? Any extra information is appreciated.

We are looking forward to hearing from you. Have a great day!

It is sitting in the uncleared checks in the bank account. We attempted to get ahold of the former employee to no avail. I have already reported it to the State as an escheated check. I now need to clear it somehow from the bank and issue an ACH to the State.

Hi there, Ann.

Let me help you clear the escheated check in QuickBooks Desktop (QBDT).

If you still have the option to edit the transaction in your company file. We can manually clear this one in your Chart of Accounts (COA). I’ll show you how:

1. Go to the Lists menu and select Chart of Accounts.
2. From there, select the account to which the check was added to.
3. Tick the check column to clear the transaction.
4. Then, select Yes in the prompt message to finish.

On the other hand, if you no longer have the option. I recommend consulting your accountant to know what actions to take in clearing this type of paycheck. 

Additionally, you can check out this article to find out how to handle escheated checks: Understand the process for unclaimed wages.

Feel free to comment if you have more concerns with your transactions. The Community always has your back. Have a good one!

RoseJillB,

Checking the "clear" column on a transaction doesn't remove it from the account balance. We need a way to restore the balance to the payroll account at the point we pay the state through accounts payable. I'm thinking a journal entry is the correct way to do that. What are your thoughts? 

Hello,

I have a bonus pay check from 2021 that an employee never cashed. The check was handed to the employee. I have asked the employee about cashing the check on a number of occasions and she has never gotten it cashed. What is the best way to clear a pay check in Quickbooks Desktop?

By way of full disclosure, I am not affiliated with Intuit and I am not an accountant. I am a business office manager of a small company in Utah. Consequently, please know that this is my personal procedure. 

Because the property belongs to the employee, it cannot be "absorbed" back into company funds. Rather, it must be turned over to the State as Unclaimed Property. (This process is officially termed "Escheatment.") This also applies to other "abandoned" funds, such as customer overpayments or outstanding vendor checks. There typically is no minimal amount - even a penny needs to be reported, although small amounts (i.e., less than $50) are often excluded from Due Diligence requirements and allowed to be submitted to the state in aggregate. 

I attempted to get clear instructions on the specific transaction path to follow in Quickbooks Desktop, but just kept getting told to check with our State's Unclaimed Property division to clarify the escheatment process. On the flip side, the State of Utah said they could not advise on accounting procedures.

Consequently, I came to my own conclusion that I would create a new Quickbooks G/L account labeled "ESCHEATMENT/UNCLAIMED PROPERTY" (Other Current Liability) and use a Journal Entry to transfer the balance from the payroll checking account to the Escheatment account where it would be held until the annual Unclaimed Property report is submitted. I then entered an Invoice, payable to the designated State Department of Unclaimed Property, and expensed it to the ESCHEATMENT G/L Account and generated a check from there to accompany the report. 

Following are the specific transaction steps, using an outstanding paycheck in the amount of $100.00 as an example. 

1. If not already established, create a new G/L account, selecting "OTHER ACCOUNT TYPES" and choosing "OTHER CURRENT LIABILITY." Give it an account name of "ESCHEATMENT/UNCLAIMED PROPERTY". 

1. Create a Journal Entry:

Debit the Payroll Checking Account $100.00.  Credit the Escheatment Account $100.00.

(This puts $100.00 back into the PAYROLL CHECKING account. The ESCHEATEMENT account balance should now be $100.00)  

1. Create an Invoice made payable to the appropriate State's Division of Unclaimed Property (follow the state's instructions for the specific payee). Expense $100.00 to the Escheatment Account.

(The ESCHEATMENT account balance should now be $0.00 and ACCOUNTS PAYABLE account should increase by $100.00).

1. Issue a check to accompany your Unclaimed Property Report. (The ACCOUNTS PAYABLE account is now reduced by $100.00.)

Keep in mind that each state should have an official website that provides specific instructions for that state, which instructions may include "Due Diligence Requirements" [documentation that you attempted to contact the property owner within specified date ranges using specific language], and Dormancy periods [the amount of time that the property has to be abandoned or stale dated] that must be met before you can start the escheatment process. Some states also require that you report to the state of last known address, while other states offer reciprocity. Also, keep in mind that if you missed a mandatory reporting deadline, there may be penalties; however, the state may offer a penalty waiver for voluntary reporting, so it would be worth your time to speak to someone in that department if you are beyond your deadline.  Because of the dormancy period, you may still be within your reporting deadline for 2021. In Utah, items that were issued between 07/01/2021-06/30/2022 are included in this year's report with a due date of 11/01/2023. 

I hope this helps.

By way of full disclosure, I am not affiliated with Intuit and I am not an accountant. I am a business office manager of a small company in Utah. Consequently, please know that this is my personal procedure. 

Because the property belongs to the employee, it cannot be "absorbed" back into company funds. Rather, it must be turned over to the State as Unclaimed Property. (This process is officially termed "Escheatment.") This also applies to other "abandoned" funds, such as customer overpayments or outstanding vendor checks. There typically is no minimal amount - even a penny needs to be reported, although small amounts (i.e., less than $50) are often excluded from Due Diligence requirements and allowed to be submitted to the state in aggregate. 

I attempted to get clear instructions on the specific transaction path to follow in Quickbooks Desktop, but just kept getting told to check with our State's Unclaimed Property division to clarify the escheatment process. On the flip side, the State of Utah said they could not advise on accounting procedures.

Consequently, I came to my own conclusion that I would create a new Quickbooks G/L account labeled "ESCHEATMENT/UNCLAIMED PROPERTY" (Other Current Liability) and use a Journal Entry to transfer the balance from the payroll checking account to the Escheatment account where it would be held until the annual Unclaimed Property report is submitted. I then entered an Invoice, payable to the designated State Department of Unclaimed Property, and expensed it to the ESCHEATMENT G/L Account and generated a check from there to accompany the report. 

Following are the specific transaction steps, using an outstanding paycheck in the amount of $100.00 as an example. 

1. If not already established, create a new G/L account, selecting "OTHER ACCOUNT TYPES" and choosing "OTHER CURRENT LIABILITY". Give it an account name of "ESCHEATMENT/UNCLAIMED PROPERTY."

2. Create a Journal Entry:

Debit the Payroll Checking Account $100.00.  Credit the Escheatment Account $100.00.

(This puts $100.00 back into the PAYROLL CHECKING account. The ESCHEATEMENT account balance should now be $100.00)  

3. Create an Invoice made payable to the appropriate State's Division of Unclaimed Property (follow the state's instructions for the specific payee). Expense $100.00 to the Escheatment Account. 

(The ESCHEATMENT account balance should now be $0.00 and ACCOUNTS PAYABLE account should increase by $100.00).

4. Issue a check to accompany your Unclaimed Property Report. 

(The ACCOUNTS PAYABLE account is now reduced by $100.00) 

All accounts should now be clear and the employee can still collect her property by contacting the state. 

Keep in mind that each state should have an official website that provides specific instructions for that state, which instructions may include "Due Diligence Requirements" [documentation that you attempted to contact the property owner within specified date ranges using specific language], and Dormancy periods [the amount of time that the property has to be abandoned or stale dated] that must be met before you can start the escheatment process. Some states also require that you report to the state of last known address, while other states offer reciprocity. Also, keep in mind that if you missed a mandatory reporting deadline, there may be penalties; however, the state may offer a penalty waiver for voluntary reporting, so it would be worth your time to speak to someone in that department if you are beyond your deadline.  Because of the dormancy period, you may still be within your reporting deadline for 2021. In Utah, items that were issued between 07/01/2021-06/30/2022 are included in this year's report with a due date of 11/01/2023. 

I hope this helps.

Hi there, @cafagan. I've got some tips to discuss with you on how to handle an uncashed paycheck in QuickBooks Desktop.

If you have issued a payroll check to your employee and haven't collected or cashed it, you'll need to report this and transfer the funds to your state after a certain period of time. Through the escheatment process, the state assumes ownership of the unclaimed or abandoned wages. The procedure varies per state. Therefore, it's advisable to contact your state agency about it.

Furthermore, I'll go over with the Do's and Don'ts for unclaimed payroll checks or wages.

As an employer, you should do the following:

• Hold the check for the employee to claim for some time (maybe 1 to 5 years) before you turn it over to the state.
• Try to contact your employee before you report any abandoned or unclaimed employee wages to your state.
• Contact your state agency to find out what to do with the employee pay in your state.

As an employer, you shouldn't do the following:

• Void unclaimed employee paychecks. The employee is still entitled to this money.
• Change the name on the paycheck to that of the state. The paycheck must remain in the employee's name.
• Return the uncashed paychecks to your checking account. Once a paycheck is issued for wages to an employee, those funds no longer belong to the company in any way.

I'm also adding these extra guides about keeping track and personalizing your payroll transactions:

• Run payroll reports in QuickBoks Desktop Payroll
• Customize and manage your payroll reports

You can send a comment if you have other concerns with payroll. I'm always ready to back you up. Take the best care!