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Tracking draw versus commisison when employee's draw is paid on w2 with deductions

Forum|Forum|7 years ago
December 11, 2018
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I pay my employees a draw versus commission, I have been booking my payroll manually detailed per employee but I need to keep track of their draw accounts, now that the gross pay is under Payroll Expenses under Gross Wages I can't have a separate Draw account listed as Other Asset as most instructions advise. How to I keep track of their draw while recording their W2 weekly payments in my payroll clearing account or do I have to set it up totally different?

QuickBooks Desktop

Best answer by qbteachmt

First, it doesn't matter what you call it. If it is taxed when paid out, as Wages or Compensation, you can call it Draw or Advanced Draw or Advanced Commisison, or whatever. It still is Taxable Compensation.

Second, the function of Employee Advance tracked into an Other Asset account is for Loans to be repaid to you, that you gave to an employee, and that was not Taxed when giving them funds. This does not apply to what you are describing.

Don't get caught up in terminology. Examine what you are doing and not what it is called by others.

So, "I enter my payroll into QuickBooks as gross wages"

If part of this needs to be tracked separately, for clarity, you need to Split your data. The pay entry might be:

Gross Payroll $400
Advanced Commission $200

And this = $600 to be taxed.

Then, if you are asking about this because you need to offset it next time, then entry would be, as an example:

Gross Commission earned $600
Advanced Commission -$200

That would show I earned $600 but you paid me in advance $200 of it, so I don't get that whole amount this time.

Or:

Gross Commission earned $600
Advanced Commission -$200
Advanced Commission $300

This would give me $700 gross earnings.

qbteachmtAnswer

First, it doesn't matter what you call it. If it is taxed when paid out, as Wages or Compensation, you can call it Draw or Advanced Draw or Advanced Commisison, or whatever. It still is Taxable Compensation.

Second, the function of Employee Advance tracked into an Other Asset account is for Loans to be repaid to you, that you gave to an employee, and that was not Taxed when giving them funds. This does not apply to what you are describing.

Don't get caught up in terminology. Examine what you are doing and not what it is called by others.

So, "I enter my payroll into QuickBooks as gross wages"

If part of this needs to be tracked separately, for clarity, you need to Split your data. The pay entry might be:

Gross Payroll $400
Advanced Commission $200

And this = $600 to be taxed.

Then, if you are asking about this because you need to offset it next time, then entry would be, as an example:

Gross Commission earned $600
Advanced Commission -$200

That would show I earned $600 but you paid me in advance $200 of it, so I don't get that whole amount this time.

Or:

Gross Commission earned $600
Advanced Commission -$200
Advanced Commission $300

This would give me $700 gross earnings.

A

Anonymous

I see how this could work, but why would anyone do this? Seems like make work and that is is over complicating the basic problem (I'm still not sure what the OP is trying to accomplish.).

qbteachmt

I wanted to clarify there is a significant difference between a "draw" that is an advanced payroll payout (perhaps to be offset later) and a "draw" that is a loan or advanced funds (to be repaid by the employee later).

As to why someone might do this, every business has its reasons. I know furniture stores do a lot of advanced commissions and also State laws may require a minimum hourly rate equivalent wages payout, which would be calculated as from their commission due at a later date.

A

arkvalleyinfoAuthor

Thank you, yes, I appreciate your answers and information!

A

Anonymous

Can you restate the situation? What is it you're doing with a draw? It doesn't even sound legal, but it could be.

A

arkvalleyinfoAuthor

It's legal, I pay a draw versus commission, the draw is taxed paid on w2 I just don't know how to track the draw in QuickBooks, I enter my payroll into QuickBooks as gross wages and payroll liabilities so I just need an idea how to track the advanced draw in another account but the payroll has already been booked so I don't want to duplicate the payroll I just need to track the advance.

D

dchanaud

HI! Did you find a solution for this? I need to do the same thing with draw vs. commisssion.

C

ChristieAnn 11

Hi there, dchanaud.

I suggest creating an Asset Account to track the Employee Loan or Employee advance. Before doing that, I'd also recommend consulting an accountant for additional guidance when creating the correct account. They can also help you ensure in recording your cash advance and reimbursement.

Here's how to create an account:

Go to the Lists menu and click Chart of Accounts.
Click Account at the bottom of the list and then click New.
Under Other Account Types choose Other Current Asset and then click Continue.
If you are using account numbers, enter the number in the Numbers field.
In the Account Name field, enter Employee Advances.
Click Save & Close.

Next, you can either write a regular check (non-payroll) to the Employee for the Advance and post it to the Other Current Asset account or create a bill and use the Employee’s name as vendor. To do this, you'll need to use these:

Vendor = Employee’s vendor name

Account = Employee Cash Advance

Amount = Cash advance amount

Memo = [Employee Name] Cash Advance

Please follow these steps to write a regular check:

Click the Banking menu.
Choose Write check.
Select the bank account from the Bank Account drop-down list.
Choose the date for the check.
Choose the employee from the Pay to the Order drop-down list. Then, click OK.
Enter the dollar amount of the advance below to check the date.
Choose Other Current Asset accounts from the account drop-down list.
Hit Save & close.

You can also pay the Advance through Payroll. That being said, you'll need to create a Payroll Item of the type "addition". And, use the same account you used above. Then, create another Payroll Item of the type "deduction". Follow the steps below.

Go to the Lists menu and click the Payroll Item List.
Click Payroll Item at the bottom of the list and then click New.
Select the Custom Setup method and click Next.
Choose Deduction and click Next.
Enter the name for this deduction as Loan Repayment and click Next.
Leave the first two fields blank, then under the Liability account field, choose the Other Current Asset account, Employee Advances, that you created in Step 1 for tracking this expense and click Next.
Select None as the tax tracking type and click Next.
Leave the taxes unchecked and click Next.
Select Neither in the calculations based on quantity screen and click Next.
Select Net Pay and click Next.
Enter a default rate and limit if desired and then click Finish.

After that, manage Employee Loans that will be Repaid over Time on Multiple Paychecks.

Here's how:

Edit the Employee.
Change tabs to Payroll and Compensation Info.
Under Additions, Deductions, and Company Contributions select the Loan Repayment Payroll Item.
Enter the amount to be paid by paycheck in the Amount column as a negative amount.
Enter the balance remaining to be paid at this point into the Limit column as a negative amount.
Click OK.

Please check this article to see steps on how to run a payroll summary report to view your payroll totals, including employee taxes and contributions: Create a payroll summary report.

Please know that you're always welcome to post if you have any other concerns. Wishing you and your business continued success.

D

dchanaud

Thanks for the information. But this requires I set up each employee as a vendor. I process payroll through Quickbooks and was hoping to be able to post directly from the payroll program when I pay them the advance.

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