Negative check treatment

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For live payroll processing only

This article applies only to payroll checks for tipped employees. This is the only situation in which you can create a negative payroll check.

In a negative payroll check situation, the application needs to know how you want to handle the reduction of deductions and taxes for that particular check, whether or not you want to carry the shortfall amount to future checks, and if so, when to reset shortfall balances.  The sections below explain how to set up your client information to handle payroll checks with a negative net pay and how to modify tipped employee shortfall amounts. 

Setting up client information

The setup for handling negative check amounts is handled on a client-by-client basis, although you do have the option to make last minute adjustments to how the checks are handled when you are entering the payroll checks.

  1. Choose Setup > Clients, select the appropriate client, and click the Payroll Information tab.
  2. In the Negative Check Treatment section, use the Deductions drop-down list to choose whether to reduce all, none, or specific deductions when there is a shortfall amount. If you choose Selected, the Ellipsis button becomes available.
  3. To choose specific deductions, click the Ellipsis button to open the Select Deductions dialog and mark the checkboxes for the selected deductions.

    Notes

    • If more than one deduction is selected, they will be reduced in the reverse of the payroll item sort order. (The payroll item sort order is set up in the Payroll Items Sort Order dialog, available from the Setup > Payroll Items screen.)
    • If both deductions and taxes are set to be reduced, the application will first reduce deductions and then taxes.
  4. Use the Taxes drop-down list to choose whether to reduce all, none, or specific tax amounts when there is a negative net check.
  5. Click the Ellipsis button to open the Select Taxes dialog and mark the checkboxes for the appropriate taxes.

    Notes

    • If more than one tax is selected, they will be reduced in the following order: federal, state, and then local.
    • If both deductions and taxes are set to be reduced, the application will first reduce deductions and then taxes.
  6. To carry forward the shortfall amounts and try to make them up with future payroll check balances (via a prompt during payroll entry for automatic shortfall balance adjustments), mark the Carry shortfall forward... checkbox.

    Note: If this checkbox is left unmarked, the shortfall amount is retained, but there will be no prompt for adjustment during payroll check entry.

  7. If you mark the checkbox above, select the date on which to reset the shortfall balances to zero for all of the client's employees.
  8. When the Carry shortfall forward... checkbox is marked, the Do not reset balances checkbox and the Create liabilities for shortfall write off checkboxes become available. Mark them if appropriate.
    • If the Do not reset balances checkbox is marked, the balance reset date fields and the Create liabilities for shortfall write off checkbox are disabled. Shortfall balances will continue to be carried forward indefinitely and the application will attempt to make up the amounts with future check balances.
    • If the Create liabilities for shortfall write off checkbox is marked, liabilities will be created for all employees when the items that have shortfall amounts are reset to zero. The liabilities will use the selected balance reset date.

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Modifying employee shortfall balances

There is no setup that needs to be done for employees ahead of time, but once an employee has a shortfall balance for a payroll item or payroll tax item, that balance can be modified at the employee level.

  1. Choose Setup > Employees and click either the Payroll Items tab or the Payroll Taxes tab
  2. Click the Edit button.
  3. Click the Edit shortfall balances link.
  4. In the Edit Shortfall Balances dialog, enter any necessary adjustment amounts in the Adjustment column to modify the shortfall balances. The adjustments can be either positive or negative amounts.
  5. If you would like to create an adjustment liability for an adjustment amount, mark the checkbox in the Create Adjustment Liabilities column.
  6. Click the OK button to complete your changes.
  7. Click the Enter button in the Employees screen to save your shortfall balance adjustment and, if applicable, to create the adjustment liabilities.

Note: By default, the dialog displays only payroll items and payroll tax items that are active for the selected employee. To also display any inactive items that have shortfall balances, mark the Include inactive items with a balance checkbox.

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