[Stephanie Ramos]

We have an employee with an overpayment from 2016.  She has agreed to a payment plan to deduct a fixed amount from each paycheck.  What is the best pay code to use for this?  We looked at creating a new garnishment code but am not able to make it tax sheltered.  Would creating a new standard deduction code that is tax sheltered be the best solution?

Thanks!

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Stephanie Ramos
PBFCM
Houston TX
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[Tom Franz, CPP]

I would suggest you use an “Other” Pay Type pay code with a negative amount. This will ensure that “Gross Wages” in addition to taxable wages gets handled correctly. Ideally, if possible, use the pay code that was originally used to over pay the employee.

Just my 2 cents … hope it helps!

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Tom Franz, CPP
Product Manager
Integrity Data
Lincoln IL
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[Sherlene Sorenson]

Hi Stephanie,

I believe Tom is referring to using a negative amount on a Paycode that is Other Pay Type – which would work if you have the Integrity Negative Pay solution.

Without the Negative Pay product, I do believe that the only way to do a negative pay amount using a Paycode is with a Paycode where Pay Type = Commission.  You need to be careful that the negative pay amount doesn’t bring each individual check into a negative taxable wages situation.

So you could try that. Another option would be to do a Manual Check Adjustment to adjust the Taxable Wages and taxes to what they should have been, and then process this with a deduction that is not tax sheltered, as if you had given the employee a loan that they are repaying.

If you processed it purely with a tax sheltered deduction, it could throw off your SUTA and FUTA taxable wages, depending on how those work for you.

Hope this helps give you some ideas!

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Sherlene Sorenson
Sr Implementation Consultant
InterDyn BMI
West Fargo ND
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[Tom Franz, CPP]

Sherlene,

One minor point of clarification, the Integrity product allows the user to create negative “Hours” transactions. Creating negative “Amount” transactions for “Other” pay type pay codes can be done using core Payroll functionality. But, you are correct that users would need our product to create negative transactions for “Hourly” (and Based on Hourly) pay type pay codes.

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Tom Franz, CPP
Client Engagement Manager
Integrity Data
Lincoln IL
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[Joni Finnell]

Stephanie:

We have had this situation too. But the pay back was in the same calendar year as the overpayment. So, that will affect how you handle it. Since the employee had already paid taxes on the full amount that they received we created a standard deduction code that is tax sheltered. In our situation the pay rate was too high so we didn’t have to worry about adjusting the # of hours.

This process doesn’t change the gross wages. So, we also processed a beginning balance manual check to move the deduction dollars to the original pay code. Keep in mind that both will be negatives since you are dealing with a deduction. You will also need to process a JE to reclass the wages to the correct GL account, if you want to be that precise.

As always, the best thing to do is to run the transactions through your Test Co. We had several scenarios that we tried. This one was the cleanest.

Thanks

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Joni Finnell
Project Accountant/GP Troubleshooter
Consumer Support Services, Inc.
Newark OH
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