User Support Forum

Our church gave gift cards to employees this year. We understand the importance of reporting this non-cash gift as taxable income and will run the gift cards through our payroll service with our next regular payroll in order to calculate appropriate withholding for the giftcards. After receiving the payroll journal from the payroll company, I enter everything into Powerchurch Payroll module. If I enter the gift card through the Payroll Module (as an income Item Description called Gift Card), Powerchurch thinks it should pull the amount of the gift card from our checking account AGAIN (it has already paid for the gift cards once when they were purchased). Can I enter the amount of the gift card as "ZERO" and manually enter the withholding as indicated in the provided Payroll Journal? If I do this, the check amount shows up as a negative. Is this okay, how will this affect my reconciliation? Is this a transaction better handled as a Journal Entry in Fund Accounting? What would my entry look like? Thank you, in advance, for any help you can give!

You want to enter the amount of the gift card in Payroll. You'll then need to do a Journal Entry in Fund Accounting to correct for the duplicate posting to the checking account.

Here's an example. Let's say the gift card was for $100.00. The entry for this would be to debit an expense account (Gift Card) and credit the checking account for $100.00. Next, the $100.00 is input as an income item in the Payroll Module. Let's say your payroll service calculates 7.65% ($7.65) withholding for the Social Security and Medicare withholding, 7.65% ($7.65) for the employer share of the Social Security and Medicare withholding, $5.00 Federal withholding, and $2.00 State withholding. So the net check amount is $85.35 ($100.00-$7.65-$5.00-$2.00). The entry for this from the Payroll Module is as follows:

Debit Expense (Gift Card) $100.00
Debit Expense (Employer Share SS/Med Tax) $7.65
Credit Taxes Payable $22.30
Credit Checking Account $85.35

Now, you'll need to do a Journal Entry in Fund Accounting to clear the $85.35 credit to the checking account, since a check wasn't actually cut. The entry for this is as follows:

Debit Checking Account $85.35
Credit Expense (Gift Card) $85.35

Then, when you do the bank reconciliation in the program, just clear the deposit for $85.35 and the check for $85.35 against each other.

Matt,

THANK YOU so much! Entries are made everything balances perfectly, I couldn't have done it without your help!!

Karen

For the future there is an easier way to do this in payroll. You can setup a taxable benefit item. This will increase the amount of taxable income without adding additional dollars to a pay check. This was originally added to handle the taxable benefit of certain life insurance policies, but should work in this case too.

Thank you, Jeff!