Refund of Wages from a terminated employee

Legacy KB ID: 5477

Question

I overpaid an employee in the past who no longer works for us.  He has refunded the overpayment.  How do I process it in Reckon Accounts Business?

Answer

You should consult a Reckon Accredited Partner to assist in this transaction to ensure all relevant registers are properly adjusted.

Some users have found the following solution met their needs.

 

1.    Record a Deposit into your bank account for the overpaid wages allocating the amount to a bank Payroll Clearing Account.

2.    Create a new Hourly Wage payroll item – call it Gross Wages Overpaid Recovered and set to your usual Wages expense account.  Settings should include: 

a.    Tax tracking type:  Gross Payments [to reduce the Gross payments reported on the Payment Summary].

b.    Taxes:  Tick PAYG Tax and State Payroll Tax [to reduce the Total Tax Withheld amount on the Payment Summary and Payroll Tax reporting].

c.    Inclusions:  Tick the relevant Super items if the reversal is within the unreported quarter [to reduce the amount of super expense and liability].

3.    Create a new Addition payroll item – call it Net Wages Overpaid Recovered and set it to your Payroll Clearing Account [to offset the net wages amount allocated to this account by the Deposit in Step 1 above and clear out the account]. Settings should include:

a.    Tax tracking type:  None [as this is taken care of in Step 1(c) above].

b.    Taxes:  Untick all [as this is taken care of in Step 1(d) above].

c.    Calculate based on quantity:  Neither.

d.    Default rate and limit:  Leave blank.

e.    Inclusions:  Untick all [as this is taken care of in Step 1(e) above.

4.    Create another new Addition payroll item – call it Wages Overpaid PAYG Reversal and set it against your PAYG Withholding Liability Account [to reduce the balance in this account].  Settings should include:

a.    Tax tracking type:  None.

b.    Taxes:  Untick all.

c.    Calculate based on quantity:  Neither.

d.    Default rate and limit:  Leave blank.

e.    Inclusions:  Untick all.

5.    Record the wage reversal using the Payroll Clearing Account:

a.    Use the Gross Wages Overpaid Reversal item in the Earnings section with a negative hours quantity.

b.    Use the Net Wages Overpaid Reversal item in the Other Payroll Items section for the net wage refunded.

c.    Use the Wages Overpaid PAYG Reversal item in the Other Payroll Items section for the tax withheld amount.

d.    Confirm the cheque amount is zero and complete the processing.

6.    Record the Liability Adjustment:

a.    Date:  Date of refund.

b.    Effective Date:  Date of refund.

c.    Adjustment is for:  Employee – select from dropdown list.

d.    Accounts Affected:  Do not affect accounts [this is only to correct the Payment Summary].

e.    Select the PAYG Tax payroll item in the Taxes and Liabilities section using a negative amount with an appropriate memo [reduce the amount in the Total Tax Withheld on the Payment Summary].

7.    Verify:

a.    The PAYG Withholding liability account has been reduced by the amount of the tax.

b.    The Payroll Clearing account has a debit and credit entry for the amount of the net wage.

c.    The Wages accounts shows a negative entry for the amount of the gross wage.

d.    The Payment Summary agrees with the Payroll Summary report for the Employee.

 

Need more help?

Ask the Reckon Community at: https://community.reckon.com/reckon.

 

Thanks to Reckon Accredited Partner Suzanne Lockwood for this suggestion. 

 

How did we do?

Employee(s) with both FBT and FBT Exempt items in their pay, displaying only one INB Payment Summary

Leave Loading is not showing in Taxable Pay field on Payslip

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