The video walks through the process of recording an employee loan repayment in QuickBooks Online payroll. It starts by creating a payroll deduction item, selecting the 'Other' category and 'Loan Repayment' type, and entering memo details such as the first payment date, total loan amount, and per‑paycheck repayment amount. The presenter explains setting an annual maximum amount and handling year‑end carryover, emphasizing the need to adjust the balance on January 1 or turn off the deduction when the loan is fully paid. A key point is that the loan must be recorded as a liability (often using an employee advance account) rather than an expense, and the payroll settings must be configured to map the deduction to this liability account. The tutorial concludes with a checklist to ensure the expense is entered correctly, the loan is linked to the proper account, and the repayment is accurately reflected in payroll, ensuring the loan balance zeroes out as intended.
Chapters
Happy Tuesday, Linda.
Happy Tuesday.
Tuesday seems like payday. Tuesday's payday. So we've got a payroll question for today then. We've got Bronco Billy is asking about, how do I post in QuickBooks when an employee repays a debt to my company?
Well, we gotta help Bronco Billy, don't we?
We do. You're the payroll guru, so what's, what's the suggestion on this?
Well, I can tell you that you're going to need to make a payroll item that goes in their paycheck, so I'm glad you got this open. We can go right to it.
Okay, so basically we've gone into payroll for QuickBooks Online. I'm going to hit edit for pay, and then we'd have the add deduction, right?
Correct.
Choose deduction, deduction type, we're going to put Other. And then we're going to choose loan repayment, or you can add something else on if you wanted. So we always— we take advantage of the description on purpose. We're always going to put in the date of the first payment, the amount of the total to be repaid, and then the amount to be taken per check. That helps us recognize if we have to go back and reconcile the information. It helps us do that. So we can be sure, you know, at the end of the year, if it was to carry over, we need to reset the correct amount for the next year so it doesn't repopulate the full amount. That's right.
On the employee stuff too, which is good. It lets them have clarification on stuff.
So if we did that, it would be $300, auto, $75. And so basically I was putting the date, $300 borrowed, $75 Which would be the same thing here. Instead of doing percentage gross, we're going to put 75, annual amount $300. Okay. And as we were talking about, when you set this up, one of the key things to remember is if this carries over to the next year, this is an annual maximum amount. So if you only paid off, let's say, 3 payments before the end of the year, you'd end up in the next year, it would automatically go back up to $300. So you do these memos to make sure you can calculate what the balance should be as of January 1st because you need to set up a new loan as of January 1st with just the remaining amount to be paid. So similarly, if it was paid off, you need to turn it off so it doesn't re-up on its own too.
Absolutely.
So yeah.
And the loan has to be a liability. It's a loan. It's not an expense because I've seen that on people's file, people's chart of accounts. People make an employee loan expense. The loan is a liability. It's not an expense. You have to make sure you have that correct account too.
That's a good point. So what you're talking about there is, let's say you're writing a check out to the person for the $300 to begin with. The way you categorize that to initially start would be There's actually usually like an employee advance account.
Yeah.
That whatever you map that to, you would then go in and set up under your payroll settings that that loan gets mapped to that specific account also.
Correct.
And that looks like— we'll go out of this setup here. Boom. Payroll settings. And you would do your— let's see here—
accounting. Yeah, it's always under accounting. Yeah.
So here's where you would map the different details out, the different people, and you'd have a special account just for the actual items coming off of that.
Right.
So hopefully that helps. So it's a couple steps to it, right? Make sure that you put the expense in the right the first time. Make sure when you put the loan into payroll that you tag the right account behind it for the payroll. That'll make sure it meshes and you actually get it zeroed back out. If you do that, you're good to go.
You should be good.
Happy payday.
Happy payday. Happy loan repayment day.
Exactly. Alright, thank you very much, and as always, here's wishing you a very successful week.
