Paycheck lost then cashed; how to handle?

Posted by Ed on December 20, 2008, 4:11 pm

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One of my employees claimed a paycheck ($195) got lost in the mail so
I re-issued it without stopping payment on the original. In
reconciling my account I see that both checks were cashed last month.
Perhaps on purpose or perhaps accidentally; but I'm sure the money is
spent and he won't be able to give it back. At this point I could un-
void the check and pay the payroll taxes (late, or change the date to
current so it won't be late). The other option is to change the
account in QB to employee advances, then pay back from future
earnings. Which is better, or is there another way to handle this?
Thanks for your help.

Posted by Laura on December 20, 2008, 10:17 pm

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> One of my employees claimed a paycheck ($195) got lost in the mail so

> I re-issued it without stopping payment on the original. In

> reconciling my account I see that both checks were cashed last month.

> Perhaps on purpose or perhaps accidentally; but I'm sure the money is

> spent and he won't be able to give it back. At this point I could un-

> void the check and pay the payroll taxes (late, or change the date to

> current so it won't be late). The other option is to change the

> account in QB to employee advances, then pay back from future

> earnings. Which is better, or is there another way to handle this?

> Thanks for your help.

Either method will work. For such a small paycheck which ever method is
easiest for you and insures that the extra paycheck is counted in 2008 would
be what I would do.

Posted by CMS, VA CPA on December 24, 2008, 12:41 pm

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>> One of my employees claimed a paycheck ($195) got lost in the mail so

>> I re-issued it without stopping payment on the original. In

>> reconciling my account I see that both checks were cashed last month.

>> Perhaps on purpose or perhaps accidentally; but I'm sure the money is

>> spent and he won't be able to give it back. At this point I could un-

>> void the check and pay the payroll taxes (late, or change the date to

>> current so it won't be late). The other option is to change the

>> account in QB to employee advances, then pay back from future

>> earnings. Which is better, or is there another way to handle this?

>> Thanks for your help.

> Either method will work. For such a small paycheck which ever method is

> easiest for you and insures that the extra paycheck is counted in 2008

> would be what I would do.

I usually agree with Laura, but I respectfully disagree on this one.

The second $195.00 is not a paycheck and should not be treated as one. This
was not a payment for services by the employee but an inappropriate amount
that the employee took- accidentally or fraudulently.

I would treat the net check ($195.00) as an advance to the employee and then
deduct the repayment from the next paycheck if he does not reimburse you
directly. If he does not get any future paychecks or reimburse you, then
you have a theft issue.

If you treat it as additional payroll, what would you do if he reimburses
you? This would really cause you some payroll recordkeeping nightmares.
Also, if you count it as additional payroll, it means that you will have to
kick in additional money for employer FICA/MC.

--
Charles M. Shanes, CPA
Charles M. Shanes CPA, LLC
Richmond, VA
QuickBooks ProAdvisor
Microsoft MPAN Member for SBA
www.shanescpa.com
cshanes@-Delete-This-Nospam-shanescpa.com

Posted by Laura on December 24, 2008, 12:55 pm

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>>> One of my employees claimed a paycheck ($195) got lost in the mail so

>>> I re-issued it without stopping payment on the original. In

>>> reconciling my account I see that both checks were cashed last month.

>>> Perhaps on purpose or perhaps accidentally; but I'm sure the money is

>>> spent and he won't be able to give it back. At this point I could un-

>>> void the check and pay the payroll taxes (late, or change the date to

>>> current so it won't be late). The other option is to change the

>>> account in QB to employee advances, then pay back from future

>>> earnings. Which is better, or is there another way to handle this?

>>> Thanks for your help.

>> Either method will work. For such a small paycheck which ever method is

>> easiest for you and insures that the extra paycheck is counted in 2008

>> would be what I would do.

> I usually agree with Laura, but I respectfully disagree on this one.

> The second $195.00 is not a paycheck and should not be treated as one.

> This was not a payment for services by the employee but an inappropriate

> amount that the employee took- accidentally or fraudulently.

> I would treat the net check ($195.00) as an advance to the employee and

> then deduct the repayment from the next paycheck if he does not reimburse

> you directly. If he does not get any future paychecks or reimburse you,

> then you have a theft issue.

> If you treat it as additional payroll, what would you do if he reimburses

> you? This would really cause you some payroll recordkeeping nightmares.

> Also, if you count it as additional payroll, it means that you will have

> to kick in additional money for employer FICA/MC.

Points well taken. You are correct that it depends on how the employee tends
on repaying the company for the additional paycheck.