Reissuing Expired Paychecks

I am sorry, I think I caused confustion with my post.  The employee put the checks away to deposit later after she could get to the bank, but it ended up being several months later and by the time she went to the bank they had reached the 6 month expiration date.  She has requested I issue new checks to replace the ones form earlier in 2021.  I wasn't sure how to proceed on issuing the new checks. Can you help?

By way of full disclosure, I am not affiliated with Intuit and I am not an accountant. I am a business office manager of a small company in Utah. Consequently, please know that this is my personal procedure. 

Because the property belongs to the employee, it cannot be "absorbed" back into company funds. Rather, it must be turned over to the State as Unclaimed Property. (This process is officially termed "Escheatment.") This also applies to other "abandoned" funds, such as customer overpayments or outstanding vendor checks. There typically is no minimal amount - even a penny needs to be reported, although small amounts (i.e., less than $50) are often excluded from Due Diligence requirements and allowed to be submitted to the state in aggregate. 

I attempted to get clear instructions on the specific transaction path to follow in Quickbooks Desktop, but just kept getting told to check with our State's Unclaimed Property division to clarify the escheatment process. On the flip side, the State of Utah said they could not advise on accounting procedures.

Consequently, I came to my own conclusion that I would create a new Quickbooks G/L account labeled "ESCHEATMENT/UNCLAIMED PROPERTY" (Other Current Liability) and use a Journal Entry to transfer the balance from the payroll checking account to the Escheatment account where it would be held until the annual Unclaimed Property report is submitted. I then entered an Invoice, payable to the designated State Department of Unclaimed Property, and expensed it to the ESCHEATMENT G/L Account and generated a check from there to accompany the report. 

Following are the specific transaction steps, using an outstanding paycheck in the amount of $100.00 as an example. 

1. If not already established, create a new G/L account, selecting "OTHER ACCOUNT TYPES" and choosing "OTHER CURRENT LIABILITY." Give it an account name of "ESCHEATMENT/UNCLAIMED PROPERTY". 

1. Create a Journal Entry:

Debit the Payroll Checking Account $100.00.  Credit the Escheatment Account $100.00.

(This puts $100.00 back into the PAYROLL CHECKING account. The ESCHEATEMENT account balance should now be $100.00)  

1. Create an Invoice made payable to the appropriate State's Division of Unclaimed Property (follow the state's instructions for the specific payee). Expense $100.00 to the Escheatment Account.

(The ESCHEATMENT account balance should now be $0.00 and ACCOUNTS PAYABLE account should increase by $100.00).

1. Issue a check to accompany your Unclaimed Property Report. (The ACCOUNTS PAYABLE account is now reduced by $100.00.)

Keep in mind that each state should have an official website that provides specific instructions for that state, which instructions may include "Due Diligence Requirements" [documentation that you attempted to contact the property owner within specified date ranges using specific language], and Dormancy periods [the amount of time that the property has to be abandoned or stale dated] that must be met before you can start the escheatment process. Some states also require that you report to the state of last known address, while other states offer reciprocity. Also, keep in mind that if you missed a mandatory reporting deadline, there may be penalties; however, the state may offer a penalty waiver for voluntary reporting, so it would be worth your time to speak to someone in that department if you are beyond your deadline.  Because of the dormancy period, you may still be within your reporting deadline for 2021. In Utah, items that were issued between 07/01/2021-06/30/2022 are included in this year's report with a due date of 11/01/2023. 

I hope this helps.