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    Payroll expenses for a non-payroll expense

    Here is the story.

    Client paid one of his employees for the remodeling of the office as a side job, account R&M was used, not run through payroll.

    This happened in 2011 and I plan to reclassify this payment as employee advance and run through payroll in 2012. Only caveat is that this is not a current expense, rather a current asset. This payroll expense should then be reclassified as "Leasehold Improvement". The improvement was finished in 2012.

    I do not like to not have the payroll paid match up with the W-2's/W-3.

    Any ideas?

    #2
    Originally posted by Gretel View Post
    Here is the story.

    Client paid one of his employees for the remodeling of the office as a side job, account R&M was used, not run through payroll.

    This happened in 2011 and I plan to reclassify this payment as employee advance and run through payroll in 2012. Only caveat is that this is not a current expense, rather a current asset. This payroll expense should then be reclassified as "Leasehold Improvement". The improvement was finished in 2012.

    I do not like to not have the payroll paid match up with the W-2's/W-3.

    Any ideas?
    Yes. I've had clients who also paid an employee (with 1099misc of course) for work not related to employees' regular duties.

    However in your case, the additions to leasehold improvement are NOT a current asset, rather what we call a fixed asset, or deferred expense.

    So whatever you do, forget about trying to classify payments in payroll, but issue the 1099misc.
    ChEAr$,
    Harlan Lunsford, EA n LA

    Comment


      #3
      Originally posted by ChEAr$ View Post
      Yes. I've had clients who also paid an employee (with 1099misc of course) for work not related to employees' regular duties.

      However in your case, the additions to leasehold improvement are NOT a current asset, rather what we call a fixed asset, or deferred expense.

      So whatever you do, forget about trying to classify payments in payroll, but issue the 1099misc.
      Ooops, that "current asset" was meant to say "fixed asset".

      It is my understanding that anything paid to an employee has to go through payroll and that it is a big no, no to issue a W-2 and a 1099 for the same employee in a current relationship. I can see that an employee job (with the same employer) changes and then you actually have two separate relationships, one for W-2 and one for 1099. But this is a different set or circumstances.

      I am curious what others have to say.

      Comment


        #4
        Does this employee do this kind of work for others on the side from time to time? He can have a business in which he would be treated as self-employed for this purpose.

        Comment


          #5
          You are right, that could be a reason. He is a guy that could do basically anything. What I know from the employer is that his employee "needed cash" and they entered into this agreement. I am sure employee does not want to see a 1099 and pay the taxes. The employer already agreed to pay his part of the employment taxes if we run through payroll.

          I will ask some more questions though.

          Comment


            #6
            And if you do decide to run through payroll you could put in both figures in payroll and subtract out the amount to put toward assets. Just like you do with tips that the employs collect themselves but are on their W-2.
            JG

            Comment


              #7
              Originally posted by JG EA View Post
              And if you do decide to run through payroll you could put in both figures in payroll and subtract out the amount to put toward assets. Just like you do with tips that the employs collect themselves but are on their W-2.
              You totally lost me, JG, with everything. I really would like to understand this. Can you please try again?

              Comment


                #8
                I think he means:

                Debit - Leasehold Improvement $XXXX.XX
                Credit - Payroll Expense $XXXX.XX

                To back it out of payroll, (but I'm still on my first cup of coffee).
                http://www.viagrabelgiquefr.com/

                Comment


                  #9
                  Ha, I always thought JG was a girl?

                  Anyway, that entry is exactly was I addressed in my OP, that I do not like. I think JG is talking about the payroll process?

                  Comment


                    #10
                    Originally posted by Gretel View Post
                    Ha, I always thought JG was a girl?

                    Anyway, that entry is exactly was I addressed in my OP, that I do not like. I think JG is talking about the payroll process?
                    You just can't tell when a poster uses initials instead of real name.
                    ChEAr$,
                    Harlan Lunsford, EA n LA

                    Comment


                      #11
                      Originally posted by Gretel View Post
                      What I know from the employer is that his employee "needed cash" and they entered into this agreement. I am sure employee does not want to see a 1099 and pay the taxes. The employer already agreed to pay his part of the employment taxes if we run through payroll.I will ask some more questions though.
                      Well, it seems you have your answer right there. And based on that, it should have been payroll, added into his W-2 and FICA tax paid. I suppose you could do a 1099MISC at this point, and let the employer pay 1/2 the tax to the employee. But then that would be considered compensation this year. Your post says you will run it through in 2012 payroll, not adjust 2011? That's what I would do. 941-X.
                      Last edited by Burke; 03-24-2012, 11:41 AM.

                      Comment


                        #12
                        Originally posted by Burke View Post
                        Well, it seems you have your answer right there. And based on that, it should have been payroll, added into his W-2 and FICA tax paid. I suppose you could do a 1099MISC at this point, and let the employer pay 1/2 the tax to the employee. But then that would be considered compensation this year. Your post says you will run it through in 2012 payroll, not adjust 2011? That's what I would do. 941-X.
                        Had it happened in the middle of the year I would agree. But it happened between Christmas and NY Eve. I find I have reason to call it employee advance under these circumstances. First quarter reports have not been filed yet.

                        Thank everyone for their opinion.

                        Comment


                          #13
                          Originally posted by ChEAr$ View Post
                          You just can't tell when a poster uses initials instead of real name.
                          Which reminds me of a nice little story I still smile about. Some years ago I had the same thing with another board member, we then exchanged private e-mails. Turned out this lady was also a gentlemen.

                          He told me that he used to tease his daughters, saying: When I was a little girl....and that it took them quite a while to figure out that this never could be true.

                          Comment


                            #14
                            Originally posted by Gretel View Post
                            You totally lost me, JG, with everything. I really would like to understand this. Can you please try again?
                            No one understands me because I cannot convey the thoughts in my head to words, which is why I don't do well with email clients.

                            Anyway, what I meant was on the return where my client has payroll that includes tips that he doesn't collect I want the whole W-2 amount to appear for matching. So on that line I put on the explanation overflow:
                            W-2 wages $.....
                            minus$..... tips collected by the employees.
                            So, I was thinking you could do the same thing.
                            W-2 wages minus "wages paid for an asset" or something like that.

                            That way it would match against the 941's / W-3 when the IRS does its check.

                            What Jesse said would be the accounting way to do it. I just thought thought you wanted to show the Box 1 number on your return.

                            Also, I haven't been a girl for some time. (Not mad at you - mad at the passing of time.)
                            JG

                            Comment


                              #15
                              Originally posted by JG EA View Post
                              No one understands me because I cannot convey the thoughts in my head to words, which is why I don't do well with email clients.

                              Anyway, what I meant was on the return where my client has payroll that includes tips that he doesn't collect I want the whole W-2 amount to appear for matching. So on that line I put on the explanation overflow:
                              W-2 wages $.....
                              minus$..... tips collected by the employees.
                              So, I was thinking you could do the same thing.
                              W-2 wages minus "wages paid for an asset" or something like that.

                              That way it would match against the 941's / W-3 when the IRS does its check.

                              What Jesse said would be the accounting way to do it. I just thought thought you wanted to show the Box 1 number on your return.

                              Also, I haven't been a girl for some time. (Not mad at you - mad at the passing of time.)
                              Well, you might not feel understood but you surely understood my dilemma, and I think this is a good idea. This aside, I thoroughly sympathize with you. I am not good at writing either.

                              ...I haven't been a girl for a long time ...some more sympathy but I get more humorous with time passing, have not so much too loose any longer.

                              Comment

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