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Advance Pay Request
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Advance Pay Request
Discuss workforce management, performance management, retention, communication, motivation, contributing to business results and other topics.
Not a payroll expert so need help with an advance pay issue that our accountant now states was done incorrect. Our P/R provider typically won't answer these types of questions.
An EE requested one
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Forums » Topic Forums » General Forum » Advance Pay Request
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Advance Pay Request
posted at 8/12/2009 8:35 AM EDT
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Posts: 63
First: 1/3/2003 Last: 8/10/2011 |
Not a payroll expert so need help with an advance pay issue that our accountant now states was done incorrect. Our P/R provider typically won't answer these types of questions.
An EE requested one week's advance pay, which was granted through payroll and subject to taxes and deductions. She formally agreed to repay via weekly payroll deductions vs. losing one week's pay upon her return from disability. (The advance pay was granted while she was on her first week of two weeks disability and was so noted on payroll). Our accountant is now stating this was not the correct procedure. Typically employees go to accounting for a "loan" (from Petty cash) which they repay to the accountant over a designated and agreed upon period of time. This amount was too large for this type of transaction. The accountant now states the way this was done will impact the EEs W-2 because the employee did not forego a week's pay for hours worked and taxes will be messed up. Since the EE is repaying the amount via weekly payroll vs. going one week without pay until it's paid in full, I'm having a very hard time understanding why this would adversely affect her wages on her W-2. Tax issues? Your insight and wisdom is greatly appreciated! |
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Advance Pay Request
posted at 8/12/2009 8:47 AM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
This is why I hate to pay advances and rarely allow it. The taxable consequences and payback are never straightforward for the employee or the employer/payroll, even though it seems like it should be.
If she is just repaying the net amount because the income was taxable at the time and it is all within the same taxable (calendar) year, then she overpaid on taxes -- that is they were deducted from money that in the end she never got (or gave back). So year to date amounts would need to be adjusted negatively both on the employers side and the employees side. I don't think the employer can have that pay advance deduction be a "pretax" deduction from wages because it is not qualified for tax favoritism like a 401k or Section 125. Honestly though it's hard to explain and understand. I have a great payroll forum (www.payrolltalk.com) where I suggest you post this and some of the other posters will help you more than I can. |
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