payroll check

[oceanlovin'ea]

One of my clients sent me an "oh, no!" email yesterday. Last week he told his wife to make out his payroll check. (She is a silent shareholder in the corporation and can sign on the account). She made the check out to herself and then deposited in their bank account. Now what is he to do?
She does not get a payroll check or even draws from the s corporation. She gets her K-1 at end of the year is all. She just wasn't thinking when she did that. Probably the first time she wrote and signed a check.

We can't void the check since she already deposited it and it cleared the bank. Do we have to do anything? Can I just post the check like it was made out to him? Unless he was audited, no one will ever know that the check was made out in the wrong name. I normally would not suggest letting things slide but I am drawing a blank here.

Thanks for your help

Linda, EA

[Burke]

I think I would have her reimburse the company for the amount. Then draw the payroll check to him normally. It's cleaner.

[ChEAr$]

Barring an audit it would probably fly low to the ground, i.e. under the radar and you could post it as if made out to him.

But perhaps it would be well to make this a teaching moment. Let her return the funds to the corporation with her own check, and then cut a regular check to husband for his salary.

Of course you can't tell them what to do,only advise, but you're probably a trusted advisor I think, and any advice you give them ends up as a command. (grin

[BOB W]

Since she is a shareholder, take is as a distribution. Unless cash is tight or marital type issues, write his normal payroll check. Other than that, deposit her check as has been suggested.

[Y2KEA]

Since she is a shareholder, take is as a distribution. Unless cash is tight or marital type issues, write his normal payroll check. Other than that, deposit her check as has been suggested.

Don't forget any distributions must be in the same ratio to all shareholders on a timely basis as to their interest in the corporation.

[BOB W]

yup....................... my oops.........

[S T]

One of my clients sent me an "oh, no!" email yesterday. Last week he told his wife to make out his payroll check. (She is a silent shareholder in the corporation and can sign on the account). She made the check out to herself and then deposited in their bank account. Now what is he to do?
She does not get a payroll check or even draws from the s corporation. She gets her K-1 at end of the year is all. She just wasn't thinking when she did that. Probably the first time she wrote and signed a check.

We can't void the check since she already deposited it and it cleared the bank. Do we have to do anything? Can I just post the check like it was made out to him? Unless he was audited, no one will ever know that the check was made out in the wrong name. I normally would not suggest letting things slide but I am drawing a blank here.

Thanks for your help

Linda, EA

I guess to be clear on this issue we need to know if it was a "net check" and you have to track payroll taxes" or a "gross check and no payroll taxes"
Reimbursement seems good to me, but thinking of the payroll steps - if you re-issue to the husband - you do not want payroll taxes twice. So there are maybe a few "hoops" and corrections on the Tax withholdings that will have to be considered.

Maybe the reimbursement for net check will work from Wife and then just issuing a net check to husband for that part of the correction, but also think about how the W-2 tracking and 941 tracking have to be corrected.

There are days! that I really dislike Payroll!

Sandy

[Roberts]

As long as it went through the accounting correctly, the name on the check is the only error and the clients aren't demanding a fix for legal / divorce reason, I'd tell them "let's just ignore it and not do it again".
Make a note of what happened and document for your records.

If she withheld the taxes and everything on her own tax number instead of his, I'd reverse it all within the accounting and just skip issuing a new check.

[oceanlovin'ea]

appreciate all your thoughts

You are just the greatest people. I really love this message board!!!

She wrote the net amount. I do the bookkeeping for them. So I (my husband/bookkeeper) will be the one doing the posting and recording of the transaction.

They are people who are very precise. He is an engineer/draftsman. Very detailed. Really a joy to do his work. So I think to have her reimburse the company and rewrite a check in his name will be the cleanest and most acceptable for them. We will post the check she wrote to herself into Misc expense and the check she writes back to the company will be offset that misc expense. Then the new check written in his name will be the payroll check and payroll figures will be accurate.

I do like clean paper trails. My memory trails are kind of hazy after a while.

Thanks so much for your help.

Linda, EA