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Set up and repay employee advances

SOLVED•by QuickBooks•224•Updated 1 week ago

Learn how to pay an advance to your employees in QuickBooks Online Payroll and QuickBooks Desktop Payroll.

If you need to loan your employees money in a pinch, you can give them an advance.

Note: Not sure which payroll service you have? Here's how to find your payroll service.

Pay your employee an advance

The best option to give your employee an advance is to handwrite them a check. Or you can use a money app like Venmo or Zelle.

Method 1: Write and print a check.

If you choose to write and print a check, make sure to select the account where the advance payroll item is tracked. Then, when you create a repayment paycheck, the amount will be deducted from the account used to provide the advance.

Method 2: Pay through payroll

Step 1: Set up an advance payroll item

  1. Go to Lists, then Payroll Item List.
  2. Select Payroll Item ▼ dropdown, then New.
  3. Select Custom Setup, then Next.
  4. Select Addition, then Next.
  5. Enter the name of the item, such as Employee advance.
  6. Select the expense account where you want to track the item. Select Next.
  7. Set the tax tracking type to None. Select Next.
  8. Select Next twice. You don’t need to do anything on the next two windows.
  9. Select net pay in theGross vs. net window. Select Next.
  10. Leave Default rate and limit fields blank. You can add the amount when you create your employee’s paycheck.
  11. Select Finish.

Note: When you create a paycheck, the advance item and the amount must be added in the Other Payroll Items section.

Step 2: Run your payroll with the advance

Run your scheduled payroll with the advance payment or create an advance payment-only paycheck. Enter the amount for the advance as you run payroll.

Repay an advance through payroll

  1. Go to Payroll, then Employees (Take me there).
  2. Select your employee.
  3. From Deductions & contributions, select Start or Edit.
  4. Select + Add deduction/contribution.
  5. From the dropdown menu, add the following:
    • Deduction/contribution: + Add deduction/contribution.
    • Deduction/contribution type: Other deductions
    • Type: Cash Advance Repayment
    • Description: Add a deduction name, such as Cash Advance Repayment.
  6. Select Flat amount. 
  7. Enter the amount to deduct from your employee’s paycheck.
  8. If you need to collect the advance over more than one paycheck, enter the total amount owed in the Annual maximum field.
  9. When finished, select Save.

Step 1: Create a repayment item

  1. Go to Lists, then Payroll Item List.
  2. Select Payroll Item ▼ dropdown, then New.
  3. Select Custom Setup, then Next.
  4. Select Deduction, then Next.
  5. Enter a name, such as Cash advance repayment. 
  6. In the Liability account field, select the expense account used to give the advance.
  7. Set the tax tracking type to None. Select Next.
  8. Select Next twice. You don’t need to do anything on the next two windows.
  9. Select net pay in the  Gross vs. net window. Select Next. 
  10. Leave Default Rate and Limit fields blank. Select Finish.

Step 2 (Optional): Add the item to the employee profile 

  1. Go to Employees, then Employee Center. 
  2. Select your employee. 
  3. Select Payroll Info, then add the repayment item in the Additions, Deductions, and Company Contributions section. 
  4. Select OK, when you're done.

Note: Add a limit to the employee's profile if you'll need to collect the advance on more than one paycheck.

Run your scheduled payroll with the advance payment or create an advance payment-only paycheck. Enter the amount for the cash advance as you run payroll.

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