Uncashed Payroll Checks

I'll help you with handling uncollected paychecks, MagnoliaJRC.

Under the Escheat law, you're responsible for turning over the paycheck to your state. Each regulation varies from state to state, though. Having said that, you don't have to clear or void the transaction. You'll have to reach out to your state agency for the escheatment rules in your state.

You can check this article about understanding Escheat regulations for unclaimed wages for more information. 

Feel free to drop by if you have other payroll concerns. We're just around to help you. 

How do I "clear" them out so I can pay the State Treasurer for the funds and make my accounting match?

This is the question that Magnolia asked. It is my question as well.  I went through the process to pay the State for the wages for 2 paychecks for an employee who did not cash the paychecks.  In our state it is a separate payment to the state. So, I have done that.  That payment came out of my payroll checking account this morning.  Now, the questions is "How do I "clear" them out ... and make my accounting match?"

That is my questions, how do I clear the outstanding checks from my books?  I have been searching for an answer and NO ONE has yet to explain what you do in QB to actually clear the checks.  I cannot void the paychecks, so how do I clear them? What exactly do I do in QB to process the uncashed checks and create a payment to the State. Please can someone answer this specific question.  Thanks

Jackie

I’ll help you settle these entries, @JM_hollings.

Thanks for sharing your concern on the Community page. Let me provide some information to get this resolved.

You can use the Journal Entry to clear the outstanding checks from your books. It balances the debit and credit amounts entered in the system. Doing this offsets the checks for a zero net effect. 

Here’s how:

1. Select the + New button.
2. Choose Journal entry.
3. Fill out the fields to create your entry.
4. Click Save and close.

You can reach out to your accountant to assist you further with the accounts affected.

I’ve added an article here about reconciliation for your future reference. It contains a complete process to make sure everything is matched and appropriately recorded. 

If you have other questions besides outstanding checks, please leave me a message in the comment section. I'm always around to help. Take care, Jackie.

This is a little late given the date the question was asked, but in the event someone else needs it, they hopefully will find this.

I just had to go through this with a client-

They had an outstanding check on their books from an uncashed paycheck over a year old. I advised them to turn it over to the state and here are the actions I told them to take to straighten out their books:

- Enter a journal entry to Debit cash and Credit an expense account for the outstanding amount with the current date (I suggested a payroll exp account).

- They will eventually have to pay the state the unclaimed funds which will be a Debit to an exp account (I suggested to use the same payroll exp as the above JE) and a Credit to cash. This way the two exp transactions cancel out.

- Next time they reconcile their bank account, select both the JE debit to cash as well as the uncleared paycheck (credit to cash) and these will zero out and have no effect on the ending cash balance.

The check to the state will come through and clear out in a future reconciliation and all will be balanced again!

The credit is not to an expense. The expense has already been recorded as Payroll Expense when the check was written. The fact that it isn't cashed represents a liability payable. In this case an escheatment liability payable. The journal entry will be a debit to the cash account from which the funds were not actually withdrawn, and a credit to the escheatment liability payable account. The new check will debit the liability, clearing the payable and credit cash as the funds are actually sent to the state. 

When reconciling the cash account the payroll credit to cash and the escheatment debit to cash will reconcile to zero. Just make sure you mark them both as cleared.