Pay Advances
Pay advances allow you to advance additional money to
an employee when you process a paycheque.
The money advanced to the employee can then be recovered on another paycheque by entering a negative advance.
As you may know, advances paid against future earnings should be included in future income and taxed. The pay
advance feature in Sage Simply Accounting does not
calculate taxes. If you are providing a payroll advance that is taxable,
the simplest solution is to set
up a payroll income as a taxable advance. Consult your federal and
provincial tax authorities to determine which taxes apply to the advance.
There are two scenarios in which taxes do not need to
be calculated for pay advances:
Overpayments
If an employee has been overpaid and the cheque
has been cashed, adjust
the cheque
to the correct amount and then in the same paycheque enter the difference in the Advance row. This ensures that
the cheque
amount matches the original overpayment. You can then "repay"
the advance on the next paycheque by entering a negative Advance amount.
The employee will "repay"
the advance within the same remitting period
You can use the advances feature for taxable
advances if you are going to be recovering the advance from the employee
within the same remitting period that the advance was made. For example,
if you remit on a monthly basis and you make an advance to an employee,
you do not need to calculate the taxes if the advance is repaid in the
same month. The reason for this is that there is no net change to the
employee's taxes.
Consider this kind of advance as a loan. When
you process the employee's regular paycheque, the advance will be calculated
against the amount the employee receives. This ensures that all taxes
are correctly calculated for all employees.
Note: The pay advance feature
should not be used as a regular method for paying employees. If you issue
advances regularly, make sure that you set up a payroll income as a taxable
advance, according to federal and provincial guidelines.
What do you want to do?
Enter a pay advance
to an employee