Employee Cash Advance transferred into a severance

Hi there, Harvey.

I'm here to help you process a severance pay to your terminated employee with cash advanced in QuickBooks Online (QBO).

Based on the details you've shared above, you can create an unscheduled payroll for the terminated employee to process severance pay.

Before we proceed, we need to set up a payroll item for the severance pay first. Here's how:

1. Go to the Payroll menu on the left panel to choose Employee.
2. From the list, click on the worker’s name to access its profile.
3. In section Pay types section, click Edit.
4. Another window will open where you can mark the box for Other Earnings.
5. This will display another field box.
6. Enter Severance pay as the item name and the amount in the field box.
7. Click Done.

Once completed, the newly created pay type field will appear for the employee's name when you're ready to run an unscheduled payroll. Here's how:

1. Go to Payroll, then Employees.
2. From the Run payroll ▼ dropdown, select one of the following: Bonus only, Commission only, or Fringe benefits if you already selected one of these as the pay type.
3. Based on your selection, you may be asked additional questions. Enter any info about taxes or paycheck calculations (if applicable). Once complete, select Continue. 
4. Review the pay period (if applicable) and pay date.
5. Select the employee in question.
6. Click the column, or select Actions ⋮, then Edit paycheck to enter your pay details.
7. Under each employee’s name, select paper or direct deposit paycheck.
8. Tick Preview payroll.
9. Select or review the QuickBooks bank account to track your payroll.
10. Select Preview payroll details or Submit payroll.
11. Hit Close.

To know more about managing and creating a final check for an employee, please refer to this article: Create final paychecks for terminated employees.

To remove the employee from your active employee list so you don’t get billed for them anymore, update their employee status. Check out this article for future reference: Terminate or change your employee's status on payroll.

Please leave a comment if you have follow-up questions about this or anything else. I'm more than happy to answer them. Take care.