I am reconciling my MAY bank statement and was confused how one payroll transaction posted. I am hoping that someone can shed some light on this.
This is the scenario:
My pastor announced his resignation and requested to have his MEDICAL & RETIREMENT benefits paid to him as taxable income. Normally I cut a separate check outside of payroll to accomplish this. After being notified to do it in the manner that he requested, I added those items to the EMPLOYEE PAY ITEMS and thought everything was good because at the bottom of the the dialog box it states 'Taxable Inc.' $1,250.00 which is what I expected it to do. All was good up until I attempted to reconcile the general checking account this evening.
To my surprise I saw the following post in POSTED TRANSACTIONS and have no understanding as to why it would have posted this way. Why would Check# 7672 appear in the 'Deposits and Other Additions' portion of the Bank Reconciliation Accounts rather than the 'Checks and Other Subtractions'?
What should/could I have done differently. What needs to be done to correct this entry?
Pay items 806 and 821 should be type Deduction, not Income.
If you look at the description for 806, since it is type Income, it may also have an associated tax table. ($173.08 is exactly 35% of $500.00 is why I am suspecting this).
If you figure out what items 806 and 821 should be, and want to correct the entry, you may want to simply go to Payroll, void check. If that is not possible (if the check has already been cashed), then look at the entries in the Debit and Credit columns in the descriptions of 806 and 821, and reverse those accounts in Fund Accounting / Enter Transactions. This won't update Payroll, however, which may have errors over a longer period.
By the way, it is correct for health insurance to Debit the checking account and Credit a liability account. This is because the amount is taken from checking in the payroll check (because the employee is shown paying the amount), put back into checking in the health insurance pay item, and taken out of checking when the health insurance company is paid. Two credits and one debit leaves a net of one credit to the checking account.
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I intentionally changed the type to income because the $'s are being converted from a benefit that is normally issued with a separate check, to a taxable income item. Apparently I cannot do that in payroll? The $'s are not going to a qualified health provider or retirement account, rather it is being given to the pastor as 'cash' which needs to show up on his W-2's as income. What should I have done differently? The reason that I did it this way was so that it would hit the budgeted accounts correctly and not skew them.
Thank you so much for your response...... I have to cut one more check in the month of JUNE similar to the one in MAY and I want to do it correctly this time.
I understand. Disregard the 35% of $500. $173.08 is the net of $500 plus $250 minus $500 minus $76.92.
I still think something is backwards in the Debits and Credits in your 806 and 821 items. Maybe you used pre-existing items as templates, or something. The pattern should be the same as item 1 - SP Salary (i.e. credit the bank account, and debit the expense account, and use the same tax table, if any). Then change the expense accounts in 806 to be "Health Insurance paid to the pastor" (or some shortened name), and the expense account in 821 to be "retirement paid to the pastor".
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Thank you so much John..... this information is very useful to me. I will take your advice.
I still think something is backwards in the Debits and Credits in your 806 and 821 items. Maybe you used pre-existing items as templates, or something.
You couldn't be more correct, I used the existing template for HEALTH & RETIREMENT and failed to flip the debit/credit, novice mistake... now the issue is being able to correct the one entry that caused this 'heartburn'.
If you figure out what items 806 and 821 should be, and want to correct the entry, you may want to simply go to Payroll, void check. If that is not possible (if the check has already been cashed), then look at the entries in the Debit and Credit columns in the descriptions of 806 and 821, and reverse those accounts in Fund Accounting / Enter Transactions.
What are the ramifications, even if the check has been cashed, if I simply VOID that one check and create a manual one using the same date, amounts, etc.?
That will work, however, use payroll to create the new check (not manual check in Accounts Payable). Void the original check (in Payroll / void check). Print out the new check on a blank piece of paper and rip it up. The payroll and employee record will updated correctly.
Make sure the new check has the same check number, date, and amount as the original.
You can watch my PowerChurch tutorials now on YouTube!
