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palmettositemanagement
November 20, 2024
Question

Employee loan forgiveness

  • November 20, 2024
  • 2 replies
  • 59 views

I have an employee that currently has a loan with the company. A check was cut to the employee, and that was setup in QB desktop. They have been paying the loan back a set amount per paycheck. However, I want to forgive the loan, sort of like an end of the year bonus. Should I just journal the loan balance to the bonus account? What is the best way to put this in the books?

2 replies

Rainflurry
Rainflurry
Level 11
November 20, 2024

@palmettositemanagement 

 

It should go through payroll so both employer and employee taxes are withheld/paid and the amount is recorded as wages on the employee's W-2.  The net paycheck should be $0 and you can clear the loan balance and increase your wage expense with a journal entry - debit wage expense, credit note receivable for the balance.    

    P
    palmettositemanagementAuthor
    November 20, 2024

    Thank you- we have an outside company that does payroll however which is why I am a little confused. 

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