Tracking draw versus commisison when employee's draw is paid on w2 with deductions

HI!  Did you find a solution for this?  I need to do the same thing with draw vs. commisssion.

Hi there, dchanaud.

I suggest creating an Asset Account to track the Employee Loan or Employee advance. Before doing that, I'd also recommend consulting an accountant for additional guidance when creating the correct account. They can also help you ensure in recording your cash advance and reimbursement.

Here's how to create an account:

1. Go to the Lists menu and click Chart of Accounts.
2. Click Account at the bottom of the list and then click New.
3. Under Other Account Types choose Other Current Asset and then click Continue.
4. If you are using account numbers, enter the number in the Numbers field.
5. In the Account Name field, enter Employee Advances.
6. Click Save & Close.

Next, you can either write a regular check (non-payroll) to the Employee for the Advance and post it to the Other Current Asset account or create a bill and use the Employee’s name as vendor.  To do this, you'll need to use these:

• Vendor = Employee’s vendor name

• Account = Employee Cash Advance

• Amount = Cash advance amount

• Memo = [Employee Name] Cash Advance

Please follow these steps to write a regular check:

1. Click the Banking menu.
2. Choose Write check.
3. Select the bank account from the Bank Account drop-down list.
4. Choose the date for the check.
5. Choose the employee from the Pay to the Order drop-down list. Then, click OK.
6. Enter the dollar amount of the advance below to check the date.
7. Choose Other Current Asset accounts from the account drop-down list.
8. Hit Save & close.

You can also pay the Advance through Payroll. That being said, you'll need to create a Payroll Item of the type "addition". And, use the same account you used above. Then, create another Payroll Item of the type "deduction". Follow the steps below.

1. Go to the Lists menu and click the Payroll Item List.
2. Click Payroll Item at the bottom of the list and then click New.
3. Select the Custom Setup method and click Next.
4. Choose Deduction and click Next.
5. Enter the name for this deduction as Loan Repayment and click Next.
6. Leave the first two fields blank, then under the Liability account field, choose the Other Current Asset account, Employee Advances, that you created in Step 1 for tracking this expense and click Next.
7. Select None as the tax tracking type and click Next.
8. Leave the taxes unchecked and click Next.
9. Select Neither in the calculations based on quantity screen and click Next.
10. Select Net Pay and click Next.
11. Enter a default rate and limit if desired and then click Finish.

After that, manage Employee Loans that will be Repaid over Time on Multiple Paychecks. 

Here's how:

1. Edit the Employee.
2. Change tabs to Payroll and Compensation Info.
3. Under Additions, Deductions, and Company Contributions select the Loan Repayment Payroll Item.
4. Enter the amount to be paid by paycheck in the Amount column as a negative amount. 
5. Enter the balance remaining to be paid at this point into the Limit column as a negative amount. 
6. Click OK.

Please check this article to see steps on how to run a payroll summary report to view your payroll totals, including employee taxes and contributions: Create a payroll summary report.

Please know that you're always welcome to post if you have any other concerns. Wishing you and your business continued success.

Thanks for the information.  But this requires I set up each employee as a vendor.  I process payroll through Quickbooks and was hoping to be able to post directly from the payroll program when I pay them the advance.  

I have another option for you, dchanaud.

Aside from giving the employee advance through a regular check, you'll want to create an addition item and add it on the employee's paycheck. This way, you can post it directly to the employee's account.

However, I'd recommend seeking additional advice from your accountant since this will also add to the employee's gross pay as soon as the paycheck is created.

Here's how to add a payroll item for the employee advance:

1. Go to the Lists menu and click Payroll Item List.
2. Click Payroll Item at the bottom of the list and then click New.
3. Select the Custom Setup method and click Next.
4. Choose Addition and click Next.
5. Enter the name for this addition as Employee Loan, Click Next.
6. On the Expense Account screen, choose the Other Current Asset account, Employee Advances, that you created in Step 1 for tracking this expense and click Next.
7. Select None as the tax tracking type.
8. Leave the taxes unchecked and click Next.
9. Select Neither in the calculate based on quantity screen and click Next.
10. Select Net Pay and click Next.
11. Leave the default rate and limit blank and click Finish.

As for the deduction, you can follow almost the same steps above. Instead of adding an additional item, select Deduction for step 4.

I'll be right here if you have additional questions.

Hi!  I am a CPA, so I do understand all the tax ramifications.  These draws against future commissions are fully taxable earnings.  So the employees are getting a regular paycheck. If an employee earns enough in commssions for the week to cover their minimum wage, they would simply get a straight commission check.  However, if they don't earn enough, they would be paid the difference as an advance against future commissions (as taxable earnings).  I do payroll in house thru Quickbooks and would like to keep it that way.  But I need to find a way to track any advances they get.  Setting them up as vendors would track their balances, but that adds alot of extra steps and room for error since it's not coming directly from the payroll check posting.  This will be for approximately 50 employees.  I was about to start looking for software to track this, but thought I'd check with QB first.  Thanks!

Hello @dchanaud,

At this time, there isn't an integrated way of tracking your employee's advance wages in the payroll system. You'll want to consider setting them up as a vendor as suggested by my colleague, @ChristieAnn.

Lastly, here's a few articles you can read for ideas about how you can manage your payroll account and related transactions: Help Articles for QuickBooks Desktop Payroll.

If there's anything else that I can help you with, please let me know in the comments I'll be here to lend a hand.

I am really confused. Here's my scenario. My husband gives the employees cash advances during the week. It comes from our petty cash account. At the time of payroll I deduct it from their checks under the Cash Advance Repayment.

I do not record the actual deduction from petty cash at the time because I know nothing about it until it's time to run payroll. Please tell me how it should be set-up in my chart of accounts and the steps I should take to record the entire transaction.

Hello there, @whittington roofing.

In QuickBooks, you'll only need to create a deduction item to pay back the cash advanced. Since you already have the "Cash Advance Repayment" item, by default it'll be recorded under payroll liabilities in your chart of account.

You can view the payroll liability accounts by going through these steps:

1. Go to Gear, then Payroll Settings.
2. Select Accounting under Preferences.
3. Scroll down to see your deduction under Other Liability & Asset Accounts.
4. Click OK towards the bottom.

As with your petty cash, I recommend consulting with your accountant to make sure it is recorded accordingly. With these steps, you're able to track your employee's cash advance correctly.

You can learn more about the payroll deductions and pay types at these links:

• Deductions and contributions.

• Supported pay types and deductions explained.

We also have a guide on QuickBooks Online Payroll that I'm sure you'll find helpful. It contains payroll-related articles and steps to help you.

That'll do it. Stay in touch if you have questions or concerns. I'd be around to assist you further. Thanks for coming in and have a nice day ahead.