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Paycheck lost then cashed; how to handle?

One of my employees claimed a paycheck ($195) got lost in the mail so I re-issued it without stopping payment on the original. In reconciling my account I see that both checks were cashed last month. Perhaps on purpose or perhaps accidentally; but I'm sure the money is spent and he won't be able to give it back. At this point I could un- void the check and pay the payroll taxes (late, or change the date to current so it won't be late). The other option is to change the account in QB to employee advances, then pay back from future earnings. Which is better, or is there another way to handle this? Thanks for your help.

Reply to
Ed
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Either method will work. For such a small paycheck which ever method is easiest for you and insures that the extra paycheck is counted in 2008 would be what I would do.

Reply to
Laura

I usually agree with Laura, but I respectfully disagree on this one.

The second $195.00 is not a paycheck and should not be treated as one. This was not a payment for services by the employee but an inappropriate amount that the employee took- accidentally or fraudulently.

I would treat the net check ($195.00) as an advance to the employee and then deduct the repayment from the next paycheck if he does not reimburse you directly. If he does not get any future paychecks or reimburse you, then you have a theft issue.

If you treat it as additional payroll, what would you do if he reimburses you? This would really cause you some payroll recordkeeping nightmares. Also, if you count it as additional payroll, it means that you will have to kick in additional money for employer FICA/MC.

Reply to
CMS, VA CPA

Points well taken. You are correct that it depends on how the employee tends on repaying the company for the additional paycheck.

Reply to
Laura

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