Skip to main content
S
Sjones94
May 16, 2025
Question

Employee Payroll Advance Loan

  • May 16, 2025
  • 1 reply
  • 0 views

We made a loan to an employee who hit hard times. This is interest free and he makes advance repayments each biweekly payroll. He would like to pay this off early, which is fine. This advance repayment is his only payroll deduction. I thought this was pre-tax. He seems to be concerned he is getting taxed twice? Can anyone she light on this?

    1 reply

    FishingForAnswers
    FishingForAnswers
    May 16, 2025

    @Sjones94  What is happening can depend on how you provided the loan originally, and how you set up the repayment item.

     

    Can you describe those in more detail?

     

    In any case, I believe advance repayments are normally set to be deducted from Net Pay; they should not be pre-tax, or it would lower their taxable wages by that amount.

    S
    Sjones94Author
    May 16, 2025

    Thank you - you are correct. We gave the employee a lump sum loan ACH transfer from our bank account - not thru payroll - and did not tax it. Each biweekly paycheck deduction is being taxed (I realized after I formed my question). So basically we gave him a loan and he is paying it back via payroll deduction. His paystub says Advance Repayment then I adjust that to short term loan in our Chart  of Accounts.

    Terms & ConditionsAccessibility statement