Skip to main content

Legal

Tax & Accounting

Trade & Supply

Risk & Fraud

News & Media

Books

Developers

Set up employees and payroll items

Set up cash advance loans for an employee

To provide a cash advance or a loan to an employee, a client can deduct that advance from the employee's payroll check. This requires the setup of two new payroll items; a cash advance pay item and a cash advance repayment deduction item.
If the client writes the advance/loan check to the employee from a separate bank account (not the payroll bank account) and has no need to track the cash advance, skip setting up the Cash Advance pay item and create only the Advance Repayment deduction to repay the advance.
Create a Cash Advance pay item
  1. In the
    Main
     tab of the Payroll Items screen, create a new
    Cash Advance
     pay item. In most cases, the calculation type should be a
    Fixed
     amount and select
    None
     for the
    Special type
    .
  2. Because the cash advance amount should not be included in the employee's gross pay, select the Amount from the
    Gross Pay Presentation
     checkbox in the Exclusions section.
  3. Likewise, this pay item should also be excluded from accruable benefit and workers' compensation calculations, select
    All
     from the the dropdown in the Exclusions section.
  4. In the Tax Exemptions tab, select the
    All
     checkbox, to exclude the pay item from all taxable wages.
  5. Review any pre-tax deductions set up for the client, such as 401(k) deductions or child support items. You may need to exclude this new payroll item from the calculation of those deductions.
Create a Cash Advance Repayment deduction item
  1. In the
    Main
     tab of the
    Payroll Items
     screen, create a
    Cash Advance Repayment
     deduction item.
  2. In the Tax Exemptions tab, make sure that all checkboxes are
    cleared
     to make sure the repayment isn't treated as a pre-tax deduction. 
Activate the new payroll items for the employee
  1. Select
    Setup
    , then
    Employees
     and, in the
    Payroll Items
     tab, activate the pay item (if needed) and the deduction item for the employee.
  2. If the repayment is to be deducted across multiple checks
    , select the ellipsis button next to the Cash Advance Repayment deduction and, in the Employee Payroll Item Settings dialog, select
    Perpetual
     in the Limit section.
    • Select
      Perpetual
       and enter an amount sets a limit on the total amount that can be withheld for this deduction. Once the limit (in this case, the repayment amount) has been reached, the item will not start calculating again unless the limit is changed.
    • For Perpetual limits, you can specify a
      Begin limit
       date to prevent the limit from reducing the deduction amount unless the check date falls on or after the specified date.
    • For Perpetual limits, you can specify a
      Previously deducted
       amount, which is included in the calculated total when enforcing the specified limit.  Use this box only for amounts that need to be added to what is tracked in Accounting CS, such as any amount that was deducted prior to using CSA or Accounting CS. Amounts from checks that have been entered are
      not
       included in the Previously deducted box
Create/process the payroll checks
  1. To give the employee the advance amount, create a payroll check that uses the new
    Cash Advance
     pay item (prior to the next payroll date).
  2. In the next scheduled payroll period, verify that the cash advance repayment is being deducted correctly.
Example 1
On June 3, employee Jeffrey Hutchinson is to receive an advance payment of $100.00. The repayment will be split into two equal payments deducted from his next 2 payroll checks - on June 7 and June 14.
  1. First, we will create the advance check for Jeffrey. Using the Cash Advance pay item (which we set up using the process detailed earlier in this article), we can see that the advance amount is not taxable and the 401(k) deduction is not being calculated on this payroll check.
  2. After saving the payroll check, we can review the taxable wage amounts in the Enter Transactions screen by selecting the check and then 
    Edit
    , then
    Adjust Taxable Wages
     window. We can verify that the Adjust Taxable Wages column shows all zeros. The cash advance should not be taxable, because it is not included as wages.
  3. Next we'll set up the repayment deduction in the Setup > Payroll Items screen (as detailed earlier in this article). The Cash Advance Repayment deduction item has a Fixed amount calculation type and a perpetual limit of $100 (the full amount of the advance). The rate of $50 (the agreed-upon amount of repayment per check) is entered in the Rate column of the Rates and General Ledger Accounts section.
  4. Process the payroll as usual, entering Jeffrey's hours worked.  The $50 deduction appears automatically on his payroll check and the deduction will be paid off completely with his 2nd payroll check.
    • June 7 payroll check - Payment 1 of 2
    • June 14 payroll check - Payment 2 of 2
    • June 21 payroll check. Nothing is deducted because the cash advance has been repaid.
  5. After printing the payroll checks that contain the Advance repayment, we can review Jeffrey's taxable wages in the Actions > Enter Transactions Screen by selecting the payroll check and then selecting Edit > Adjust Taxable Wages. The adjusted taxable wages are equal to the gross pay amount. Note that the Federal Income Tax (FIT) and State Income Tax (Michigan SIT) have an Adjusted Taxable Wage calculated at $880.00. This is reduced by $120 due to Jeffrey's 401(k) deduction.
Example 2
Jeffrey receives another advance the following month (July 1) for the same amount and repayment terms, so we can use the same Cash Advance and Cash Advance Repayment items as we did in Example 1.
The original advance took place one month earlier, so we need to update the
Begin limit date
 for the Cash Advance Repayment deduction item before we process the payroll checks.
  1. Select
    Setup
    , then
    Employees
     and select the
    Payroll Items
     tab.
  2. In the
    Limit
     section of the
    Payroll Items
     tab, update the
    Begin limit date
     box to 7/1/2019. This re-turns on the item so the application will deduct $50 a paycheck until the $100 limit is reached.

This article applies to:

  • Product: Accounting CS, Accounting CS Client Access
  • Subject: Payroll checks, Setup
Chat now

error-icon

Triva isn't available right now.

Check out the support page for our phone number and hours

error-close